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dc.contributor.advisorWesterfeld, Simone
dc.contributor.authorKiller, Olivier
dc.contributor.authorMorina, Hetem
dc.contributor.otherFirma: Vertraulich| Kontakt: | PLZ/ Ort:
dc.date.accessioned2015-09-02T07:30:49Z
dc.date.available2015-09-02T07:30:49Z
dc.date.issued2013
dc.identifier.urihttp://hdl.handle.net/11654/4555
dc.identifier.urihttp://dx.doi.org/10.26041/fhnw-2442
dc.description.abstractIn the aftermath of the 2008 2009 financial crisis, an international initiative to increase the use of central clearing for OTC derivatives emerged. The purpose of this paper is to analyze the influence on market liquidity of introducing central clearing into the CDS market. (Beitrag ist nur für FHNW Mitarbeitende sichtbar)
dc.language.isoen_UK
dc.accessRightsAnonymous
dc.subjectCentral Counterparties (CCPs)
dc.subjectCredit Default Swaps (CDS)
dc.subjectCDS Liquidity
dc.subjectCDS Market
dc.subjectCentral Clearing
dc.subject.ddc330 - Wirtschaft
dc.subject.ddc330 - Wirtschaft
dc.titleCentral Counterparties in CDS Trading
dc.type11 - Studentische Arbeit
dc.audienceSonstige
fhnw.StudentsWorkTypeBachelor
fhnw.publicationStateUnveröffentlicht
fhnw.ReviewTypeKein Peer Review
fhnw.InventedHereYes
fhnw.ConfidentLevelStaff
fhnw.leadIn the aftermath of the 2008 2009 financial crisis, an international initiative to increase the use of central clearing for OTC derivatives emerged. The purpose of this paper is to analyze the influence on market liquidity of introducing central clearing into the CDS market.
fhnw.initialPositionCredit default swaps (CDS) and other over-the-counter (OTC) derivatives are widely considered to have significantly influenced the current financial crisis. The explosive growth in recent years of CDS and OTC transactions have brought some risks for banks and other counterparties and risks to the financial system as a whole. The concern about these risks and markets led to calls for a revision of the regulatory framework for OTC derivatives. As a consequence, Eurex Clearing started to clear CDS centrally since the 31st of July 2009, but little is known about their impact on market liquidity.
fhnw.procedureThe purpose of this paper is to analyze the influence on market liquidity of introducing CCPs into the CDS market. The paper figures out the relationship between liquidity and central clearing using information on CDS clearing in the European market. The dataset is obtained from Bloomberg. To analyze the impact of central clearing on market liquidity the development of two index-based CDS and three single-name CDS before and after central-clearing has been evaluated. As a liquidity proxy the changes in the bid-ask spread during a long-term and a short-term period has been measured.
fhnw.resultsThis paper concludes that market liquidity has decreased after introducing CCPs. Different hypotheses predict that central clearing could have either a positive or negative influence on bid-ask spreads. Overall, in the empirical study there are more evidence that bid-ask spreads have widened since the introduction of CCPs in the European CDS market. As a result of that, liquidity has declined. A further finding is that the market liquidity of a certain CDS product plays a vital role in determining whether a product is suitable for central clearing or not. Consequently, a CCP has to manage the default of its clearing members which means that a CCP must be able to liquidate, hedge, or close out the defaulting positions. This means that the existence of market liquidity is of utmost importance and that CCPs only select products which already have a certain degree of liquidity. A further reason for the decrease in liquidity is the increase in costs, because of higher collateral requirements of the market participants. Furthermore, the demand for CDS products has decreased steadily since the financial crisis.
fhnw.IsStudentsWorkYes


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