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New Rules for Credit Default Swap Trading: Can We Now Follow the Risk?

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Abstract

Credit default swaps, a useful but complex financial innovation of the 1990s, were traded over the counter before the financial crisis. Because of this infrastructure, a very opaque market emerged?and from it, the severe risk imbalances that helped fuel the crisis. Reforms are now being worked out and put in place which will move the majority of credit default swaps transactions to more transparent exchanges. Market participants will be able to see pre-trade and posttrade pricing, and regulators will have access to information that will allow them to monitor risk concentrations as they develop and take actions before they become of systemic concern.

Suggested Citation

  • John B. Carlson & Margaret M. Jacobson, 2014. "New Rules for Credit Default Swap Trading: Can We Now Follow the Risk?," Economic Commentary, Federal Reserve Bank of Cleveland, issue June.
    • Handle: RePEc:fip:fedcec:00015
    DOI: 10.26509/frbc-ec-201411
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    Cited by:

    1. Matthias Weber & John Duffy & Arthur Schram, 2019. "Credit Default Swap Regulation in Experimental Bond Markets," Working Papers on Finance 1905, University of St. Gallen, School of Finance.
    2. Qiuhong Zhao, 2022. "Enhanced disclosure of credit derivatives, information asymmetry and credit risk," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 49(5-6), pages 717-751, May.

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