Economics, Econometrics and Finance
6 years ago

The credit default swap market evolves, reducing counterparty risk.

BIS quarterly review
The credit default swap market: what a difference a decade makes
Iñaki Aldasoro, Torsten Ehlers

Paper Summary

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Credit Risk

The global credit default swap (CDS) market has changed significantly in the past decade. The amount of outstanding CDS contracts has decreased, central clearing has increased, and the types of credit risks involved have shifted towards sovereigns and higher-rated securities. Netting of CDS contracts has gone up, reducing counterparty risk. Overall, the distribution of credit risks among different parties has stayed relatively the same.