Economics, Econometrics and Finance
7 years ago

Global Crisis Averted: Understanding the Link Between Liquidity and Credit Risk.

2 views
DergiPark (Istanbul University)
Credit Default Swap and Liquidity
Khaldoun Maddallah Al-Qaisi, Rafat Mohd Soudki Al-Batayneh

Paper Summary

The article explores the relationship between Credit Default Swaps (CDS) and liquidity during the 2007 global economic downturn. It found that a rise in CDS rates and liquidity issues were connected, but credit risk did not directly cause liquidity problems. Instead, a negative credit shock led to liquidity risks. The study also discusses ways to prevent similar crises in the future.

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