Sovereign credit default swaps

Frank Packer and Chamaree Suthiphongchai

BIS Quarterly Review, 2003

Abstract: This paper focuses on the sovereign segment of the credit default swap (CDS) market, examining data covering several years of quotes and trades from an important CDS inter-dealer broker. Compared to corporate or bank CDSs, sovereign CDSs are concentrated in fewer names and in contracts with reference assets of relatively short maturity, apparently a result of the fairly high proportion of low-rated sovereigns that tend to issue at short maturities. In addition, spreads on CDSs written on very low-rated sovereigns tend to be significantly wider than on those written on correspondingly low-rated corporates, consistent with the market being less sure about the consequences of sovereign default.

JEL-codes: G15 (search for similar items in EconPapers)
Date: 2003
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