Are All Credit Default Swap Databases Equal?

68 Pages Posted: 12 Jun 2019

See all articles by Sergio Mayordomo

Sergio Mayordomo

Banco de España

Juan Ignacio Peña

Universidad Carlos III de Madrid - Department of Business Administration

Eduardo S. Schwartz

Simon Fraser University (SFU); University of California, Los Angeles (UCLA) - Finance Area; National Bureau of Economic Research (NBER)

Multiple version iconThere are 4 versions of this paper

Date Written: 2010

Abstract

The presence of different prices in different databases for the same securities can impair the comparability of research efforts and seriously damage the management decisions based upon such research. In this study we compare the six major sources of corporate Credit Default Swap prices: GFI, Fenics, Reuters EOD, CMA, Markit and JP Morgan, using the most liquid single name 5-year CDS of the components of the leading market indexes, iTraxx (European firms) and CDX (US firms) for the period from 2004 to 2010. We find systematic differences between the data sets implying that deviations from the common trend among prices in the different databases are not purely random but are explained by idiosyncratic factors as well as liquidity, global risk and other trading factors. The lower is the amount of transaction prices available the higher is the deviation among databases. Our results suggest that the CMA database quotes lead the price discovery process in comparison with the quotes provided by other databases. Several robustness tests confirm these results.

Keywords: Credit Default Swap prices, Databases, Liquidity

JEL Classification: F33, G12, H63

Suggested Citation

Mayordomo, Sergio and Peña, Juan Ignacio and Schwartz, Eduardo S., Are All Credit Default Swap Databases Equal? (2010). CNMV Working Paper No. 44 (2010). Available at SSRN: https://ssrn.com/abstract=3400607 or http://dx.doi.org/10.2139/ssrn.3400607

Sergio Mayordomo

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

Juan Ignacio Peña (Contact Author)

Universidad Carlos III de Madrid - Department of Business Administration ( email )

Calle Madrid 126
Getafe, Madrid, Madrid 28903
Spain
34 91 624 9625 (Phone)
34 91 624 9608 (Fax)

Eduardo S. Schwartz

Simon Fraser University (SFU) ( email )

8888 University Drive
Burnaby, British Columbia V5A 1S6
Canada

University of California, Los Angeles (UCLA) - Finance Area ( email )

Los Angeles, CA 90095-1481
United States
310-825-1953 (Phone)
310-206-5455 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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