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

Boyarchenko, Nina; Costello, Anna M.; Shachar, Or

Journal Article

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

Abstract: The authors establish key stylized facts about the post-crisis evolution of trading and pricing of credit default swaps. Using supervisory contract-level data, they show that dealers became 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 switching to buying protection in the index market. More generally, they argue that considering simultaneous positions in different types of credit derivatives is crucial for understanding institutions’ decisions to participate in these markets and how these decisions affect prices.

Keywords: credit derivatives; CDS transactions; CDS positions; dealer market power; credit default swaps;

JEL Classification: G19; G12; G10;