The structure and dynamics of the UK credit default swap market

Our Financial Stability Papers are designed to develop new insights into risk management, to promote risk reduction policies, to improve financial crisis management planning or to report on aspects of our systemic financial stability work.
Published on 08 November 2013

Financial Stability Paper No. 25
By Evangelos Benos, Anne Wetherilt and Filip Zikes

Over-the-counter derivatives (OTCDs) have been at the centre of regulators' and policymakers' attention owing to widespread concerns that these markets contributed to the build-up of systemic risk in the 2007/08 financial crisis. In 2009 the G20 initiated a reform programme that aims to increase transparency and reduce systemic risk in these markets. This paper analyses the structure and dynamics in one segment of the OTCD market, namely the UK single-name credit default swap (CDS) market. For our analysis, we use transaction reports warehoused in the trade repository operated by the Depository Trust & Clearing Corporation (DTCC). The data span the time between January 2007 and December 2011 which enables us to take a close look at market activity during the financial crisis.

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