The impact of central clearing on counterparty risk, liquidity, and trading: Evidence from the credit default swap market

• 成果类型: Article
• 署名作者: Loon, Yee Cheng; Zhong, Zhaodong Ken
• 署名单位: State University of New York (SUNY) System; Binghamton University, SUNY; Rutgers University System; Rutgers University New Brunswick
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2013.12.001
• 发表日期: 2014
• 页码: 91-115
• 关键词: Central clearing; COUNTERPARTY RISK; Systemic risk; liquidity; Credit default swap

摘要

This paper examines the impact of central clearing on the credit default swap (CDS) market using a sample of voluntarily cleared single-name contracts. Consistent with central clearing reducing counterparty risk, CDS spreads increase around the commencement of central clearing and are lower than settlement spreads published by the central clearinghouse. Furthermore, the relation between CDS spreads and dealer credit risk weakens after central clearing begins, suggesting a lowering of systemic risk. These findings are robust to controls for frictions in both CDS and bond markets. Finally, matched sample analysis reveals that the increased post-trade transparency following central clearing is associated with an improvement in liquidity and trading activity. (C) 2013 Elsevier B.V. All rights reserved.