Advertisement

Single-Name CDSs

  • Christopher L. Culp
  • Andria van der Merwe
  • Bettina J. Stärkle
Chapter
Part of the Palgrave Studies in Risk and Insurance book series (PSRIIN)

Abstract

Single-name credit default swaps (“CDSs”) are financial instruments that facilitate the transfer of credit risk on a defined universe of debt securities issued by an underlying reference entity from credit protection purchasers to sellers. Underlying reference names include corporations, sovereigns, and other borrowers. Payments by protections sellers to purchasers are based on the occurrence of any of several credit events, as defined in the documentation governing single-name CDS transactions. We describe here the significant economic terms of single-name CDSs, the evolution of the documentation of single-name CDSs, and several specific actual and would-be credit events that have generated significant discussion regarding CDS documentation and the viability of single-name CDSs as price discovery and risk transfer instruments.

Keywords

Single-name credit default swaps Single-name CDS Credit event Restructuring event ISDA credit derivatives definitions Settlement methods CDS auctions Sovereign CDS Reference name Reference entity Hovnanian Noble group Big bang protocol Physical settlement Auction settlement Cheapest-to-deliver 

References

  1. Berg, T., and D. Streitz. 2016. Determinants of the Size of the Sovereign Credit Default Swap Market. Journal of Fixed Income 25 (3) (Winter).Google Scholar
  2. Chernov, M., A.S. Gorbenko, and I. Makarov. 2013. CDS Auctions. Review of Financial Studies 26 (3) (March).Google Scholar
  3. Collins, J.P., and P.J. Sackmann. 2003. Assessing the Legal and Regulatory Environment for Credit Derivatives. Paper Presented at the ABA Annual Meeting, Section of Business Law, Commercial Financial Services Forum: A Structured Finance Trio (August).Google Scholar
  4. Coudert, V., and M. Gex. 2010. The Credit Default Swap Market and the Settlement of Large Defaults. Economie Internationale 3 (123).Google Scholar
  5. Culp, C.L. 2013. Syndicated Leveraged Loans During and After the Crisis and the Role of the Shadow Banking System. Journal of Applied Corporate Finance 25 (2) (Spring).Google Scholar
  6. Culp, C.L. 2018. A Review of the Academic Literature on the Causes and Evolution of the Credit Crisis. Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise—Studies in Applied Finance (24) (April).Google Scholar
  7. Culp, C.L., and J.P. Forrester. 2013. U.S. Structured Finance Markets: Recent Recovery, Post-Crisis Developments, and Ongoing Regulatory Uncertainties. Journal of Structured Finance 18 (4) (Winter).Google Scholar
  8. Culp, C.L., and J.P. Forrester. 2015. Have Pre-Crisis Levels of Risk Returned in U.S. Structured Products? Evidence from U.S. Subprime Auto ABS, CLOs, and Insurance-Linked Securities Markets. Journal of Structured Finance 21 (1) (Spring).Google Scholar
  9. Das, U.S., M.G. Papaioannou, and C. Trebesch. 2012. Sovereign Debt Restructurings 1950–2010: Literature Survey, Data, and Stylized Facts. IMF Working Paper WP/12/203 (August).Google Scholar
  10. Gupta, S., and R.K. Sundaram. 2015a. Inventory Effects, the Winner’s Curse, and Bid Shading in Credit Default Swap Auction Outcomes. Journal of Derivatives 23 (2) (Winter).Google Scholar
  11. Gupta, S., and R.K. Sundaram. 2015b. Mispricing and Arbitrage in CDS Auctions. Journal of Derivatives 22 (4) (Summer).Google Scholar
  12. Helwege, J., S. Maurer, A. Sarkar, and Y. Wang. 2009. Credit Default Swap Auctions. Federal Reserve Bank of New York Staff Report No. 372 (May).Google Scholar
  13. Lieu, A. 2011. An Analysis of Credit Default Swap Auctions and Distressed Bond Markets. Working Paper (April).Google Scholar
  14. Longstaff, F.A., J. Pan, L.H. Pedersen, and K.J. Singleton. 2011. How Sovereign Is Sovereign Credit Risk? American Economic Journal: Macroeconomics 3 (2) (April).Google Scholar
  15. Pan, J., and K.J. Singleton. 2008. Default and Recovery Implicit in the Term Structure of Sovereign CDS Spreads. Journal of Finance 63 (5) (October).Google Scholar
  16. Pollack, E.R. 2003. Assessing the Usage and Effect of Credit Derivatives. Paper Presented to Harvard Law School International Finance Seminar (April).Google Scholar
  17. Zettelmeyer, J., C. Trebesch, and M. Gulati. 2013. The Greek Debt Restructuring: An Autopsy. Economic Policy 28 (75) (July).Google Scholar

Copyright information

© The Author(s) 2018

Authors and Affiliations

  • Christopher L. Culp
    • 1
  • Andria van der Merwe
    • 1
  • Bettina J. Stärkle
    • 2
  1. 1.Johns Hopkins UniversityBaltimoreUSA
  2. 2.Compass LexeconChicagoUSA

Personalised recommendations