Advanced Search
MyIDEAS: Login to save this paper or follow this series

The impact of CDS trading on the bond market: evidence from Asia

Contents:

Author Info

  • Ilhyock Shim
  • Haibin Zhu
Registered author(s):

    Abstract

    This paper investigates the impact of CDS trading on the development of the bond market in Asia. In general, CDS trading has lowered the cost of issuing bonds and enhanced the liquidity in the bond market. The positive impact is stronger for smaller firms, non-financial firms and those firms with higher liquidity in the CDS market. These empirical findings support the diversification and information hypotheses in the literature. Nevertheless, CDS trading has also introduced a new source of risk. There is strong evidence that, at the peak of the recent global financial crisis, those firms included in CDS indices faced higher bond yield spreads than those not included.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.bis.org/publ/work332.pdf
    File Function: Full PDF document
    Download Restriction: no

    File URL: http://www.bis.org/publ/work332.htm
    Download Restriction: no

    Bibliographic Info

    Paper provided by Bank for International Settlements in its series BIS Working Papers with number 332.

    as in new window
    Length: 44 pages
    Date of creation: Dec 2010
    Date of revision:
    Handle: RePEc:bis:biswps:332

    Contact details of provider:
    Postal: Centralbahnplatz 2, CH - 4002 Basel
    Phone: (41) 61 - 280 80 80
    Fax: (41) 61 - 280 91 00
    Email:
    Web page: http://www.bis.org/
    More information through EDIRC

    Related research

    Keywords: credit default swaps; bond spreads; bond liquidity; CDS index; Asia;

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Diane K. Denis & John J. McConnell & Alexei V. Ovtchinnikov & Yun Yu, 2003. "S&P 500 Index Additions and Earnings Expectations," Journal of Finance, American Finance Association, American Finance Association, vol. 58(5), pages 1821-1840, October.
    2. Long Chen & David A. Lesmond & Jason Wei, 2007. "Corporate Yield Spreads and Bond Liquidity," Journal of Finance, American Finance Association, American Finance Association, vol. 62(1), pages 119-149, 02.
    3. Ashcraft, Adam B. & Santos, João A.C., 2009. "Has the CDS market lowered the cost of corporate debt?," Journal of Monetary Economics, Elsevier, Elsevier, vol. 56(4), pages 514-523, May.
    4. Mitchell A. Petersen, 2009. "Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 22(1), pages 435-480, January.
    5. Ralph Chami & Connel Fullenkamp & Sunil Sharma, 2010. "A framework for financial market development," Journal of Economic Policy Reform, Taylor & Francis Journals, Taylor & Francis Journals, vol. 13(2), pages 107-135.
    6. Xin Huang & Hao Zhou & Haibin Zhu, 2010. "Assessing the systemic risk of a heterogeneous portfolio of banks during the recent financial crisis," BIS Working Papers, Bank for International Settlements 296, Bank for International Settlements.
    7. Hirtle, Beverly, 2009. "Credit derivatives and bank credit supply," Journal of Financial Intermediation, Elsevier, Elsevier, vol. 18(2), pages 125-150, April.
    8. Jacob Gyntelberg & Guonan Ma & Eli M Remolona, 2005. "Corporate bond markets in Asia," BIS Quarterly Review, Bank for International Settlements, Bank for International Settlements, December.
    9. Norden, Lars & Wagner, Wolf, 2008. "Credit derivatives and loan pricing," Journal of Banking & Finance, Elsevier, Elsevier, vol. 32(12), pages 2560-2569, December.
    10. Hull, John & Predescu, Mirela & White, Alan, 2004. "The relationship between credit default swap spreads, bond yields, and credit rating announcements," Journal of Banking & Finance, Elsevier, Elsevier, vol. 28(11), pages 2789-2811, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Arping, Stefan, 2014. "Credit protection and lending relationships," Journal of Financial Stability, Elsevier, Elsevier, vol. 10(C), pages 7-19.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:bis:biswps:332. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Timo Laurmaa).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.