Credit Default Swaps: Past, Present, and Future
Authors:听Augustin, P., Subrahmanyam, M. G.,听Tang, D. Y., and Wang, S. Q.
Publications: Annual Review of Financial Economics
Abstract:
Credit default swaps (CDS) have grown to be a multi-trillion-dollar,听globally important market. The academic literature on CDS has developed in parallel with the market practices, public debates, and regulatory initiatives in this market. We selectively review the extant听literature, identify remaining gaps, and suggest directions for future听research. We present a narrative including the following four aspects.听First, we discuss the bene ts and costs of CDS, emphasizing the need听for more research in order to better understand the welfare implications.听Second, we provide an overview of the post-crisis market structure and听the new regulatory framework for CDS. Third, we place CDS in the听intersection of law and nance, focusing on agency conficts and nancial intermediation. Last, we examine the role of CDS in international finance, especially during and after the recent sovereign credit crises.
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Annual Review of Financial Economics,听Forthcoming
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