Funding liquidity shocks in a quasi-experiment: Evidence from the CDS Big Bang

• 成果类型: Article
• 署名作者: Wang, Xinjie; Wu, Yangru; Yan, Hongjun; Zhong, Zhaodong (Ken)
• 署名单位: Southern University of Science & Technology; Rutgers University System; Rutgers University New Brunswick; DePaul University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2020.08.004
• 发表日期: 2021
• 页码: 545-560
• 关键词: Funding liquidity; CDS Big Bang; CDS Small Bang; standardization; Central clearing

摘要

We use the advent of new credit default swap (CDS) trading conventions in April 2009-the CDS Big Bang-to study how a shock to funding liquidity impacts market liquidity. After the Big Bang, traders are required to pay upfront fees to execute CDS transactions, with the size of the fees depending on the level of CDS spreads. While CDS bid-ask spreads decline in aggregate after the Big Bang, they do so less for contracts that require larger fees. Furthermore, the funding effect is stronger for smaller and riskier firms and for noncentrally cleared contracts. The effect also becomes stronger after Deutsche Bank's exit. (C) 2020 Elsevier B.V. All rights reserved.