The Network Structure of the CDS Market and its Determinants

By Tuomas A. Peltonen, Martin Scheicher, Guillaume Vuillemey. Social Science Research Network, 2014

144 citations recorded by the source corpus.

This paper analyses the network structure of the credit default swap (CDS) market and its determinants, using a unique dataset of bilateral notional exposures on 642 financial and sovereign reference entities. We find that the CDS network is centred around 14 major dealers, exhibits a “small world” structure and a scale-free degree distribution. A large share of investors are net CDS buyers, implying that total credit risk exposure is fairly concentrated. Consistent with the theoretical literature on the use of CDS, the debt volume outstanding and its structure (maturity and collateralization), the CDS spread volatility and market beta, as well as the type (sovereign/financial) of the underlying bond are statistically significantly related—with expected signs—to structural characteristics of the CDS market.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/590485cf38e71e72907f9d76bdbc19b58a0a3649

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Citations in the corpus

Shedding Light on Dark Markets: First Insights from the New Eu-Wide OTC Derivatives Dataset (2016, background): “These findings are also in line with previous work on CDS market microstructure (Peltonen et al, 2014; Cont and Minca, 2014).”
Credit Default Swaps: A Survey (2014, background): “26See also Pirrong (2009), Singh (2010a), Hull (2010) and Jones and Pérignon (2013) for a discussion on the clearing of derivative markets using CCPs.”
Central Clearing and Collateral Demand (2015, unknown): “The dataset used in this paper is a sub-sample of the one used in Peltonen et al. (2013), and is restricted to reference entities which are liquid enough so that time series of prices or quotes exist at a daily frequency.”