The Credit Default Swap Market: What a Difference a Decade Makes

14 Pages Posted: 11 Jun 2018

See all articles by Iñaki Aldasoro

Iñaki Aldasoro

Bank for International Settlements (BIS)

Torsten Ehlers

Bank for International Settlements (BIS)

Date Written: June 5, 2018

Abstract

Over the last decade, the size and structure of the global credit default swap (CDS) market have changed markedly. With the help of the BIS derivatives statistics, we document how outstanding amounts have fallen, central clearing has risen and the composition of underlying credit risk exposures has evolved. Netting of CDS contracts has increased, due to the combination of a higher share of standardised index products and the clearing of such contracts via central counterparties. In turn, this has led to a further reduction in counterparty risk. Underlying credit risks have shifted towards sovereigns and portfolios of reference securities with better credit ratings. The distribution of credit risks across counterparty categories has remained broadly unchanged.

JEL Classification: G23, G28

Suggested Citation

Aldasoro, Iñaki and Ehlers, Torsten, The Credit Default Swap Market: What a Difference a Decade Makes (June 5, 2018). BIS Quarterly Review, June 2018. Available at SSRN: https://ssrn.com/abstract=3193502

Iñaki Aldasoro (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Torsten Ehlers

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

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