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Credit Default Swaps: A Primer and Some Recent Trends

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  • David Lando

Abstract

The credit default swap (CDS) remains an important class of derivatives contract despite the declining activity in the single-name corporate market. I provide a quick introduction to the contracts, the pricing formula used to interpret the market premiums, the development in trading volumes, and some key insights that are important for understanding its role in markets. I then take a closer look at the CDS-bond basis and the role of trading and regulatory frictions. Finally, the European sovereign debt crisis brought back in focus the notion of a quanto spread, which I explain.

Suggested Citation

  • David Lando, 2020. "Credit Default Swaps: A Primer and Some Recent Trends," Annual Review of Financial Economics, Annual Reviews, vol. 12(1), pages 177-192, December.
    • Handle: RePEc:anr:refeco:v:12:y:2020:p:177-192
    DOI: 10.1146/annurev-financial-012820-013740
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    Cited by:

    1. Alena Audzeyeva & Xu Wang, 2023. "Fundamentals, real-time uncertainty and CDS index spreads," Review of Quantitative Finance and Accounting, Springer, vol. 61(1), pages 1-33, July.

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