Economics at your fingertips  

Dealing with dealers: Sovereign CDS comovements

Miguel Antón, Sergio Mayordomo () and Rodríguez‐Moreno, María
Authors registered in the RePEc Author Service: Maria Rodriguez-Moreno ()

Journal of Banking & Finance, 2018, vol. 90, issue C, 96-112

Abstract: We show that sovereign CDS that have common dealers tend to be more correlated, especially when the dealers display similar quoting activity in those contracts over time. This commonality in dealers’ activity is a powerful driver of CDS return comovements, over and above fundamental similarities between countries, including default, liquidity, and macro factors. We posit that the mechanism causing the excess correlation is the buying pressure faced by CDS dealers for credit enhancements and regulatory capital reliefs. An instrumental variable analysis helps alleviate the endogeneity concerns in our analysis.

Keywords: Sovereign CDS; Comovements; Commonalities; Dealers (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Dealing with dealers: sovereign CDS comovements (2017) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/j.jbankfin.2018.03.004

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Haili He ().

Page updated 2020-08-01
Handle: RePEc:eee:jbfina:v:90:y:2018:i:c:p:96-112