Corporate Credit Default Swaps Lead Market Prices Amid Global Uncertainty.
The study looked at how corporate Credit Default Swaps (CDS) and bonds prices relate to each other from 2004 to 2010. They found that lower credit ratings and unstable market conditions create more differences between CDS and bond prices. The CDS market tends to lead in price discovery over time, regardless of credit ratings. The main factor affecting price discovery is counterparty risk, especially during unusual market conditions.