Credit Default Swaps and the Credit Crisis

René Stulz

Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics

Abstract: Many observers have argued that credit default swaps contributed significantly to the credit crisis. Of particular concern to these observers are that credit default swaps trade in the largely unregulated over-the-counter market as bilateral contracts involving counterparty risk and that they facilitate speculation involving negative views of a firm's financial strength. Some observers have suggested that credit default swaps would not have made the crisis worse had they been traded on exchanges. I conclude that credit default swaps did not cause the dramatic events of the credit crisis, that the over-the-counter credit default swaps market worked well during much of the first year of the credit crisis, and that exchange trading has both advantages and costs compared to over-the-counter trading. Though I argue that eliminating over-the-counter trading of credit default swaps could reduce social welfare, I also recognize that much research is needed to understand better and quantify the social gains and costs of derivatives in general and credit default swaps in particular.

Date: 2009-09
New Economics Papers: this item is included in nep-rmg and nep-ure
References: Add references at CitEc
Citations: View citations in EconPapers (17)

Downloads: (external link)
http://www.cob.ohio-state.edu/fin/dice/papers/2009 ... aps-9-2009-Stulz.pdf
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.cob.ohio-state.edu/fin/dice/papers/2009/SSRN-CVPG-Credit-Default-Swaps-9-2009-Stulz.pdf [301 Moved Permanently]--> https://www.cob.ohio-state.edu/fin/dice/papers/2009/SSRN-CVPG-Credit-Default-Swaps-9-2009-Stulz.pdf [301 Moved Permanently]--> https://fisher.osu.edu/fin/dice/papers/2009/SSRN-CVPG-Credit-Default-Swaps-9-2009-Stulz.pdf)

Related works:
Journal Article: Credit Default Swaps and the Credit Crisis (2010)
Journal Article: Credit default Swaps and the Credit Crisis (2010)
Working Paper: Credit Default Swaps and the Credit Crisis (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecl:ohidic:2009-16

Access Statistics for this paper

More papers in Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics Contact information at EDIRC.
Bibliographic data for series maintained by ().