Economics, Econometrics and Finance
3 years ago

Central clearing reduces risk and boosts transparency in corporate credit swaps.

SSRN Electronic Journal
Effect of Central Clearing on Counterparty Risk, Liquidity and Other Determinants of Corporate Credit Default Swaps
Josephine Molleyres

Paper Summary

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Central clearing in the Credit Default Swaps market helps reduce counterparty risk and liquidity uncertainty for single name corporate CDS spreads. Regulated clearing houses improve risk management and transparency, benefiting firms in the S&P500. Firm-specific and global factors still influence CDS spreads.