The man in the middle—liquidity provision under central clearing in the credit default swap market: A regression discontinuity approach

Artikel

In this study, I analyze the effect of central clearing on credit default swap (CDS) market breadth, depth, and resiliency using a regression discontinuity design. I find evidence for a decrease in absolute bid–ask spreads and bid–ask spread resiliency and an increase in gross trading volume with the beginning of central clearing. However, we observe positive effects of central clearing on CDS market liquidity only for CDS contracts of high fundamental and liquidity risk. Further results indicate that lower trading frictions, that is, counterparty risk and regulatory capital charges, may explain the positive effects of central clearing on CDS market liquidity.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Journal of Futures Markets ; ISSN: 1096-9934 ; Volume: 42 ; Year: 2021 ; Issue: 3 ; Pages: 446-471

Classification and Topics

• Classification: Wirtschaft
• Subject: central clearing ; credit default swaps ; market liquidity ; regression discontinuity

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Schoenemann, Gregor Helmut
• Event: Veröffentlichung
• (who): Wiley
• (where): Hoboken, NJ
• (when): 2021

Further information

• DOI: doi:10.1002/fut.22288
• Handle: http://hdl.handle.net/10419/284812
• Last update: 10.03.2025, 11:43 AM CET