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Record: oai:ARNO:630665

AuteurR. Mock
TitelEvidence from Credit Default Swap demand : a study on the motivation behind CDS trading and the impact of credit rating changes on CDS demand
BegeleiderT. Ladika
Jaar2016
Pagina's49
FaculteitFaculteit Economie en Bedrijfskunde
OpleidingFEB MSc Business Administration
SamenvattingThis thesis aims to examine the motivation behind CDS trading and the impact of credit rating changes on CDS demand. To do so I analyze a dataset of CDS demand for corporate single-name CDS ranging back to 2003 which is based on CDS position data obtained from the Depository Trust & Clearing Corporation (DTCC). I find some evidence that safe companies experience less CDS demand compared to companies in distress. This is indicative of hedging being one of the economic function of the CDS market. In addition to that I find heightened CDS trading volume around both rating downgrades and rating upgrades but few evidence of market risk transfer around rating changes. Furthermore, CDS demand tends to be higher for financial companies, companies with a higher proportion of unsecured debt and equity return volatility. However, CDS demand does not seem to change significantly around changes in the risk-weight categories for corporate debt based on the Basel capital requirement framework which would be indicative for banks engaging in regulatory arbitrage. This paper adds to a small set of literature examining the information content of CDS volume and a set of literature investigating the motivation of CDS trading and the economic function of the CDS market.
Soort document scriptie master
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