Interconnectedness and systemic risk in the US CDS market

Masayasu Kanno

The North American Journal of Economics and Finance, 2020, vol. 54, issue C

Abstract: This study assesses systemic risk in the US credit default swap (CDS) market. First, this study estimates the bilateral exposures matrix using aggregate fair value data and theoretically analyze interconnectedness in the US CDS network using various network measures. Second, this study theoretically analyzes the contagious defaults. The default analysis shows the theoretical occurrence of many stand-alone defaults and one contagious default via the CDS network during the global financial crisis. A stress test based on a hypothetical severe stress scenario predicts almost no future contagious defaults. Thus, risk contagion via the CDS network is unlikely.

Keywords: Credit default swap; Systemic risk; Contagious default; Interconnectedness; Centrality measure (search for similar items in EconPapers)
JEL-codes: D85 F37 G10 G28 L14 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:54:y:2020:i:c:s1062940817304047

DOI: 10.1016/j.najef.2018.08.020

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