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Implications of CDS Listings for Reference Entities and Creditors

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Credit Default Swaps

Part of the book series: Palgrave Studies in Risk and Insurance ((PSRIIN))

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Abstract

Empirical academic research regarding the impact of credit default swaps (“CDSs”) on lenders to reference entities and reference entities themselves yield the following general results: (i) CDSs are generally used by lenders to fine-tune their desired risk/return profiles; (ii) the impact of CDS availability on banks’ credit exposure monitoring is bank-specific; (iii) the availability of CDSs positively impacts the supply of credit to reference entity borrowers, impacts the design of syndicated loan facilities, and affects reference entity borrowing costs differently based on the credit characteristics of borrowers and structures of their loans; (iv) the availability of CDSs influences capital structure and financing decisions of reference entity borrowers; and (v) creditors with significant CDS-hedged exposures can impact the bankruptcy decisions of borrowers both positively and negatively.

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Authors and Affiliations

  1. Johns Hopkins University, Baltimore, MD, USA

    Christopher L. Culp & Andria van der Merwe

  2. Compass Lexecon, Chicago, IL, USA

    Bettina J. Stärkle

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  1. Christopher L. Culp
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Correspondence to Christopher L. Culp .

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Culp, C.L., van der Merwe, A., Stärkle, B.J. (2018). Implications of CDS Listings for Reference Entities and Creditors. In: Credit Default Swaps. Palgrave Studies in Risk and Insurance. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-93076-3_10

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  • DOI: https://doi.org/10.1007/978-3-319-93076-3_10

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