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Cross-border credit derivatives linkages

Benedetta Bianchi ()

No 115, ESRB Working Paper Series from European Systemic Risk Board

Abstract: This paper is a first attempt to include credit derivatives in international macro-financial analysis. We document that gross credit derivatives holdings map to bilateral portfolio investment linkages. On a net basis, our results suggest an asymmetry between sectors and between net buyers and net sellers of CDSs. When a banking system is a net buyer of protection, the protection purchased is proportional to the debt securities held. Conversely, when a banking system is a net seller, the protection sold is proportional to the securities held. For investment funds, we find no aggregate relation between net CDSs and the debt securities held. JEL Classification: F34, F21

Keywords: CDS; cross-border positions; EMIR data; risk transfer (search for similar items in EconPapers)
Date: 2021-03
New Economics Papers: this item is included in nep-rmg
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Handle: RePEc:srk:srkwps:2021115