Does central clearing benefit risky dealers?
Sergio Mayordomo () and
Peter N. Posch
Journal of International Financial Markets, Institutions and Money, 2016, vol. 42, issue C, 91-100
We study the effect of the first introduction of central clearing to the credit default swap market using a data set of intraday quotes sent directly by the major dealers to the market. We find the event to eliminate counterparty risk and improve price information. Furthermore, we find riskier dealers to increase their trading activity. In fact, after the elimination of their counterparty risk premium they increase the number of competitive quotes both on the bid and ask sides but more pronounced on the ask side.
Keywords: Central clearing; Counterparty risk; Credit default swaps (search for similar items in EconPapers)
JEL-codes: G21 G28 D02 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:42:y:2016:i:c:p:91-100
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