The Long and Short of It: The Post-Crisis Corporate CDS Market

We establish key stylized facts about the post-crisis evolution of trading and pricing of credit default swaps. Using supervisory contract-level data, we document that dealers become net buyers of credit protection starting in the second half of 2014, both through reducing the amount of protection they sell in the single-name market and through switching to buying protection in the index market. More generally, we argue that considering simultaneous positions in different types of credit derivatives is crucial for understanding institutions’ participation decisions and how these decisions affect prices in these markets.

Keywords: CDS positions, CDS transactions, dealer market power

JEL Classification: G10, G12, G19

Suggested Citation: Suggested Citation

Boyarchenko, Nina and Costello, Anna M. and Shachar, Or, The Long and Short of It: The Post-Crisis Corporate CDS Market (August , 2019). FRB of New York Staff Report No. 879, Available at SSRN: https://ssrn.com/abstract=3334640 or http://dx.doi.org/10.2139/ssrn.3334640