Does central clearing benefit risky dealers?

Sergio Mayordomo and Peter Posch

Journal of International Financial Markets, Institutions and Money, 2016, vol. 42, issue C, 91-100

Abstract: 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: D02 G21 G28 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:42:y:2016:i:c:p:91-100

DOI: 10.1016/j.intfin.2016.02.002

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