Are CDS Auctions Biased and Inefficient?
成果类型：
Article
署名作者：
Du, Songzi; Zhu, Haoxiang
署名单位：
Simon Fraser University; Massachusetts Institute of Technology (MIT); National Bureau of Economic Research
刊物名称：
JOURNAL OF FINANCE
ISSN/ISSBN：
0022-1082
DOI：
10.1111/jofi.12541
发表日期：
2017
页码：
2589-2628
关键词：
摘要：
We study the design of credit default swaps (CDS) auctions, which determine the payments by CDS sellers to CDS buyers following defaults of bonds. Using a simple model, we find that the current design of CDS auctions leads to biased prices and inefficient allocations. This is because various restrictions imposed in CDS auctions prevent certain investors from participating in the price discovery and allocation process. The imposition of a price cap or floor also gives dealers large influence on the final auction price. We propose an alternative double auction design that delivers more efficient price discovery and allocations.