Dealing with dealers: Sovereign CDS comovements
Sergio Mayordomo () and
Authors registered in the RePEc Author Service: Maria Rodriguez-Moreno ()
Journal of Banking & Finance, 2018, vol. 90, issue C, 96-112
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)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
Working Paper: Dealing with dealers: sovereign CDS comovements (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:90:y:2018:i:c:p:96-112
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 Dana Niculescu ().