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CDS Auctions: An Overview

Author

Listed:
  • Erica Paulos
  • Bruno Sultanum
  • Elliot Tobin

Abstract

We discuss the historical background of the credit default swap (CDS) market, why CDS auctions were developed, and the most recent literature. We describe the auction rules using the Toys R Us auction as an example. Furthermore, we discuss the theoretical and empirical results presented in Chernov et al. (2013). Empirically, we extend their data to include more recent CDS auctions. Our results support their findings that dealers have incentive to manipulate the auction price downward when the net open interest is positive. Finally, we use novel dealer-level CDS positions to support Chernov et al.'s (2013) findings.

Suggested Citation

  • Erica Paulos & Bruno Sultanum & Elliot Tobin, 2019. "CDS Auctions: An Overview," Economic Quarterly, Federal Reserve Bank of Richmond, issue 2Q, pages 105-132.
    • Handle: RePEc:fip:fedreq:00067
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    References listed on IDEAS

    as
    1. Virginie Coudert & Mathieu Gex, 2010. "The Credit Default Swap Market and the Settlement of Large Defaults," International Economics, CEPII research center, issue 123, pages 91-120.
    2. Augustin, Patrick & Subrahmanyam, Marti G. & Tang, Dragon Yongjun & Wang, Sarah Qian, 2014. "Credit Default Swaps: A Survey," Foundations and Trends(R) in Finance, now publishers, vol. 9(1-2), pages 1-196, December.
    3. Iñaki Aldasoro & Torsten Ehlers, 2018. "The credit default swap market: what a difference a decade makes," BIS Quarterly Review, Bank for International Settlements, June.
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    Keywords

    cds; Credit default swaps;

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