Credit Default Swaps: A Primer and Some Recent Trends

David Lando

Annual Review of Financial Economics, 2020, vol. 12, issue 1, 177-192

Abstract: The credit default swap (CDS) remains an important class of derivatives contract despite the declining activity in the single-name corporate market. I provide a quick introduction to the contracts, the pricing formula used to interpret the market premiums, the development in trading volumes, and some key insights that are important for understanding its role in markets. I then take a closer look at the CDS-bond basis and the role of trading and regulatory frictions. Finally, the European sovereign debt crisis brought back in focus the notion of a quanto spread, which I explain.

Date: 2020
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DOI: 10.1146/annurev-financial-012820-013740

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