Are All Credit Default Swap Databases Equal
By Sergio Mayordomo, Juan Ignacio Peña, Eduardo Schwartz. 2013
148 citations recorded by the source corpus.
The presence of different prices in different databases for the same securities can impair the comparability of research efforts and seriously damage the management decisions based upon such research. In this study we compare the six major sources of corporate Credit Default Swap prices: GFI, Fenics, Reuters EOD, CMA, Markit and JP Morgan, using the most liquid single name 5-year CDS of the components of the leading market indexes, iTraxx (European firms) and CDX (US firms) for the period from 2004 to 2010. We find systematic differences between the data sets implying that deviations from the common trend among prices in the different databases are not purely random but are explained by idiosyncratic factors as well as liquidity, global risk and other trading factors. The lower is the amount of transaction prices available the higher is the deviation among databases. Our results suggest that the CMA database quotes lead the price discovery process in comparison with the quotes provided by other databases. Several robustness tests confirm these results.
Subfields: Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/dc1848338f2fd799f9a2be7c6ab5691d9d9d35ec
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Citations in the corpus
- What is the Risk of European Sovereign Debt Defaults? Fiscal Space, CDS Spreads and Market Pricing of Risk (2013, unknown): “While CMA is not the sole provider of CDS prices, Mayordomo et al. (2010) find that, in a comparison of six major providers, CMA quotes are most consistent with a price discovery process.”
- What is the Risk of European Sovereign Debt Defaults? Fiscal Space, CDS Spreads and Market Pricing of Risk (2011, unknown): “While CMA is not the sole provider of CDS prices, Mayordomo et al. (2010) find that, in a comparison of six major providers, CMA quotes are most consistent with a price discovery process.”
- The Cross-Section of Credit Risk Premia and Equity Returns (2013, background): “The model of Merton (1974), similar to other structural models, implies a specific relation between a firm’s risk-neutral default probability (PDQ) and its real-world default probability (PDP) which can be used to express λ as λ = ( Φ−1(PDQ)− Φ−1(PDP) ) 1 √ T , (24) where Φ is the standard normal cu”