Synthetic or Real? The Equilibrium Effects of Credit Default Swaps on Bond Markets

• 成果类型: Article
• 署名作者: Oehmke, Martin; Zawadowski, Adam
• 署名单位: Columbia University; Boston University; Central European University
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhv047
• 发表日期: 2015
• 页码: 3303
• 关键词: CORPORATE-BONDS; loan sales; liquidity; STOCK; derivatives; RISK; TRANSPARENCY; illiquidity; leverage; banking

摘要

We provide a model of nonredundant credit default swaps (CDSs), building on the observation that CDSs have lower trading costs than bonds. CDS introduction involves a trade-off: it crowds out existing demand for the bond, but improves the bond allocation by allowing long-term investors to become levered basis traders and absorb more of the bond supply. We characterize conditions under which CDS introduction raises bond prices. The model predicts a negative CDS-bond basis, as well as turnover and price impact patterns that are consistent with empirical evidence. We also show that a ban on naked CDSs can raise borrowing costs.