Arbeitspapier
The Determinants of CDS Bid-ask Spreads
We investigate the determinants of bid-ask spreads on corporate credit default swaps (CDSs). We find that proxies for dealer inventory costs such as variability of CDS premia and CDS trading volume explain as much as 80% of variation in CDS bid-ask spreads. We also analyze the influence of variables capturing systematic risk of reference entities, market-implied volatility, dealer funding costs and competition between dealers. Several of these variables are significant, but their explanatory power is moderate. Finally, we demonstrate that CDS bid-ask spreads do not widen preceding earnings announcement surprises, which suggests that private information does not hinder CDS liquidity.
- Language
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Englisch
- Bibliographic citation
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Series: Tinbergen Institute Discussion Paper ; No. 14-138/IV/DSF82
- Classification
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Wirtschaft
General Financial Markets: General (includes Measurement and Data)
Information and Market Efficiency; Event Studies; Insider Trading
General Financial Markets: Other
- Subject
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Credit default swaps
Liquidity
Bid-ask spreads
Components of bid-ask spreads
- Event
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Geistige Schöpfung
- (who)
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Wojtowicz, Marcin
- Event
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Veröffentlichung
- (who)
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Tinbergen Institute
- (where)
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Amsterdam and Rotterdam
- (when)
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2014
- Handle
- Last update
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10.03.2025, 11:44 AM CET
Data provider
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ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Wojtowicz, Marcin
- Tinbergen Institute
Time of origin
- 2014
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