Mutual Fund Holdings of Credit Default Swaps: Liquidity, Yield, and Risk

• 成果类型: Article
• 署名作者: Jiang, Wei; Ou, Jitao; Zhu, Zhongyan
• 署名单位: Columbia University; Hong Kong Baptist University
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12996
• 发表日期: 2021
• 页码: 537-586
• 关键词: INVESTOR FLOWS; corporate; CDS; MARKET; spreads

摘要

This study analyzes the motivations for and consequences of funds' credit default swap (CDS) investments using mutual funds' quarterly holdings from pre- to postfinancial crisis. Funds invest in CDS when facing unpredictable liquidity needs. Funds sell more in reference entities when the CDS is liquid relative to the underlying bonds and buy more when the CDS-bond basis is more negative. To enhance yield, funds engage in negative basis trading and sell CDS with the highest spreads within rating categories, and with spreads higher than those of their bond portfolios. Funds with superior portfolio returns also demonstrate more skill in CDS trading.