Credit default swaps worsened subprime mortgage defaults during financial crisis.
The study found that having credit default swap (CDS) coverage on subprime mortgages led to higher default rates. They looked at a large dataset of mortgages and discovered that pools of mortgages with CDS coverage had more defaults, especially for loans taken out around the time CDS coverage started. This trend was consistent across different areas and time periods. In summary, CDS coverage contributed to increased mortgage defaults during the financial crisis.