Credit Default Swaps: A Primer and Some Recent Trends

Posted: 10 Dec 2020

See all articles by David Lando

David Lando

Copenhagen Business School - Department of Finance

Date Written: November 2020

Abstract

The credit default swap (CDS) remains an important class of derivatives contract despite the declining activity in the single-name corporate market. I provide a quick introduction to the contracts, the pricing formula used to interpret the market premiums, the development in trading volumes, and some key insights that are important for understanding its role in markets. I then take a closer look at the CDS-bond basis and the role of trading and regulatory frictions. Finally, the European sovereign debt crisis brought back in focus the notion of a quanto spread, which I explain.

Suggested Citation

Lando, David, Credit Default Swaps: A Primer and Some Recent Trends (November 2020). Annual Review of Financial Economics, Vol. 12, pp. 177-192, 2020, Available at SSRN: https://ssrn.com/abstract=3744664 or http://dx.doi.org/10.1146/annurev-financial-012820-013740

David Lando (Contact Author)

Copenhagen Business School - Department of Finance ( email )

Solbjerg Plads 3, SOL/A4.17
Copenhagen, Frederiksberg 2000

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