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.
Keywords: SLR; cost of capital;
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