Endogenous liquidity in credit derivatives

• 成果类型: Article
• 署名作者: Qiu, Jiaping; Yu, Fan
• 署名单位: Claremont Colleges; Claremont Graduate University; Claremont McKenna College; McMaster University; Shanghai University of Finance & Economics; Shanghai Jiao Tong University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2011.10.010
• 发表日期: 2012
• 页码: 611-631
• 关键词: Credit derivatives; Dealers; liquidity provision; Informed trading

摘要

We study study the determination of liquidity provision in the single-name credit default swap (CDS) market as measured by the number of distinct dealers providing quotes. We find that liquidity is concentrated among large obligors and those near the investment-grade/speculative-grade cutoff. Consistent with endogenous liquidity provision by informed financial institutions, more liquidity is associated with obligors for which there is a greater information flow from the CDS market to the stock market ahead of major credit events. Furthermore, the level of information heterogeneity plays an important role in how liquidity provision responds to transaction demand and how liquidity is priced into the CDS premium. (C) 2011 Elsevier B.V. All rights reserved.