Discussion Paper

Credit Market Arbitrage and Regulatory Leverage


Abstract: In a companion post, we examined the recent trends in arbitraged-based measures of liquidity in the cash bond and credit default swap (CDS) markets. In this post, we turn to the mechanics of the CDS-bond arbitrage trade and explore how the costs and profitability of such trades might be affected by the finalization of the supplementary leverage ratio (SLR) rule in September 2014.

JEL Classification: G1;

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Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Liberty Street Economics

Publication Date: 2017-01-11

Number: 20170111