Briefing

Sovereign CDS Dealers as Market Stabilizers

Abstract: Economists at the Richmond Fed analyze the role of dealer-provided liquidity in sovereign credit default swap markets. Using newly available data from the Depository Trust and Clearing Corporation, they track the positions held by large dealers during crises in Ukraine, Venezuela, and Argentina. The researchers find that large dealers tended to increase their provision of insurance as risk increased during those episodes — a finding that is consistent with the notion that they tend to act as market stabilizers during times of turmoil.

Keywords: Credit; Default;

Bibliographic Information

Provider: Federal Reserve Bank of Richmond

Part of Series: Richmond Fed Economic Brief

Publication Date: 2020-12

Volume: 20

Issue: 13

Pages: 6 pgs.