Economics, Econometrics and Finance
5 years ago

CCP Clearing of Sovereign CDS Reduces Systemic Risk in Global Markets.

SSRN Electronic Journal
The Impact of Central Clearing on the Pricing of Sovereign Credit Default Swaps
Josephine Molleyres, Heinz Zimmermann

Paper Summary

Central clearing of sovereign credit default swaps through CCPs reduces systemic risk by making CDS pricing less affected by counterparty risk. This shift has no significant impact on market liquidity, and CDS spreads are mainly influenced by local factors rather than global ones.

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