Credit default swaps: lessons on the role of private ordering in mitigating systemic risk

This chapter analyzes the growth of OTC derivatives before the global financial crisis of 2008 and the role of credit default swaps, in particular, in the near collapse of the global economy. It begins by exploring the basic characteristics of derivatives used as risk management instruments by investors to hedge against or exploit the volatility of asset prices. The analysis further reveals that the pre-crisis period was characterized by a broad-based consensus favoring deregulated markets and globally designed private rules. While not always unanimously supported, permissive public regulatory choices were often encouraged by interest group lobbying, the market-friendly views of many domestic authorities, and concerns about regulatory uncertainty and international competitiveness.

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Corporate Leverage, Debt Maturity and Credit Default Swaps: The Role of Credit Supply

SSRN Electronic Journal ◽

10.2139/ssrn.1660515 ◽

2011 ◽

Cited By ~ 2

Author(s):

Heather Tookes ◽

Alessio Saretto

Keyword(s):

Credit Default Swaps ◽

Debt Maturity ◽

Credit Supply ◽

Credit Default

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Multidimensional Assessment of Economies by the Level of Sovereign Risk Premium

Moscow University Economics Bulletin ◽

10.38050/01300105202021 ◽

2020 ◽

Vol 2020 (2) ◽

pp. 3-27

Author(s):

Sergey Drobyshevsky ◽

Pavel Trunin ◽

Lyudmila Gadiy ◽

Mariya Chembulatova

Keyword(s):

Monetary Policy ◽

Risk Premium ◽

International Market ◽

Developed Countries ◽

Credit Default Swaps ◽

Sovereign Risk ◽

Political Risks ◽

Credit Default ◽

Monetary Authorities

The analysis of the international market for credit default swaps (CDS) shows that the interdependence of sovereign CDS spreads is increasing and the market remains segmented. However, the reduction in the variation of sovereign CDS spreads means increased competition for capital and should be taken into account by monetary authorities of developed countries when they tighten monetary policy. The article shows a significant role of political risks in determining the level of sovereign risk.

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