We supervised a thesis this semester on the impact of central clearing on market liquidity for credit default swaps (CDS). In this post, we want to share the main results.
On June 14, 2017, a fridge-freezer on the 4th floor of the Grenfell Tower block in London caught fire. The fire quickly spread, causing a horrible loss of at least 80 lives and injuring more than 70 people. Firefighters quickly… Continue Reading →
What is the relation between central clearing and counterparty risk? Intuitively, it seems clear that a central clearing counterparty (CCP) improves the netting mechanism. With bilateral clearing, two trading partners can only net with one another. With central clearing, the… Continue Reading →
Why the discussion about central clearing of credit default swap (CDS) contracts? For one thing, central clearing increases transparency. Once transactions have to go through a central clearing counterparty (CCP), the regulator can simply monitor the CCP to get an… Continue Reading →
Why do investors engage in credit default swap (CDS) trading? At first glance, you would assume that the main motive is to obtain protection against default risk. But of course, a CDS is a bilateral contract: for every protection buyer… Continue Reading →
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