Credit Default Swaps React Faster to Market Changes, Impacting Pricing.
The article compares credit risk pricing in the bond market and the credit default swap (CDS) market. The study found that while the long-term relationship between the two markets holds, short-term deviations can occur. These deviations are mainly due to CDS premia being more responsive to changes in credit conditions. Additionally, these deviations can persist, with only 10% being corrected within a day.