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Sovereign credit default swaps

Author

Listed:
  • Frank Packer
  • Chamaree Suthiphongchai

Abstract

The market for credit derivatives, or financial contracts whose payoffs are linked to changes in the credit quality of a reference asset, has expanded dramatically in recent years. According to the 2002 Credit Derivatives Report of the British Bankers’ Association, the credit derivatives market grew from $40 billion outstanding notional value in 1996 to an estimated $1.2 trillion at the end of 2001, and is expected to reach $4.8 trillion by the end of 2004.2 The same report indicates that single name credit default swaps (CDSs) accounted for roughly 45% of the overall credit derivatives market.

Suggested Citation

  • Frank Packer & Chamaree Suthiphongchai, 2003. "Sovereign credit default swaps," BIS Quarterly Review, Bank for International Settlements, December.
  • Handle: RePEc:bis:bisqtr:0312g
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    References listed on IDEAS

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    1. Giancarlo Corsetti & Paolo Pesenti & Nouriel Roubini, 1998. "What Caused the Asian Currency and Financial Crisis? Part I: A Macroeconomic Overview," NBER Working Papers 6833, National Bureau of Economic Research, Inc.
    2. Mishkin, Frederic S., 1999. "Lessons from the Asian crisis," Journal of International Money and Finance, Elsevier, vol. 18(4), pages 709-723, August.
    3. Pomerleano, Michael, 1998. "The East Asia crisis and corporate finances : the untold micro story," Policy Research Working Paper Series 1990, The World Bank.
    4. Michael Pomerleano & William Shaw, 2005. "Corporate Restructuring : Lessons from Experience," World Bank Publications, The World Bank, number 7373.
    5. Edward I. Altman, 1968. "Financial Ratios, Discriminant Analysis And The Prediction Of Corporate Bankruptcy," Journal of Finance, American Finance Association, vol. 23(4), pages 589-609, September.
    6. Steven Radelet & Jeffrey D. Sachs, 1998. "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, pages 1-90.
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    Citations

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    Cited by:

    1. Goderis, Benedikt & Wagner, Wolf, 2009. "Credit Derivatives and Sovereign Debt Crises," MPRA Paper 17314, University Library of Munich, Germany.
    2. Petar Chobanov & Amine Lahiani & Nikolay Nenovsky, 2011. "Money Market Integration and Sovereign CDS Spreads Dynamics in the New EU States," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
    3. Ammer, John & Cai, Fang, 2011. "Sovereign CDS and bond pricing dynamics in emerging markets: Does the cheapest-to-deliver option matter?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 21(3), pages 369-387, July.
    4. Aizenman, Joshua & Hutchison, Michael & Jinjarak, Yothin, 2013. "What is the risk of European sovereign debt defaults? Fiscal space, CDS spreads and market pricing of risk," Journal of International Money and Finance, Elsevier, vol. 34(C), pages 37-59.
    5. Brutti, Filippo & Sauré, Philip, 2015. "Transmission of sovereign risk in the Euro crisis," Journal of International Economics, Elsevier, pages 231-248.
    6. Neziri, Hekuran, 2008. "Can Credit Default Swaps Predict Financial Crises: An Empirical Test on Emerging Markets," MPRA Paper 13096, University Library of Munich, Germany.
    7. Ismailescu, Iuliana & Kazemi, Hossein, 2010. "The reaction of emerging market credit default swap spreads to sovereign credit rating changes," Journal of Banking & Finance, Elsevier, vol. 34(12), pages 2861-2873, December.
    8. Hallak, Issam, 2009. "Renegotiation and the pricing structure of sovereign bank loans: Empirical evidence," Journal of Financial Stability, Elsevier, pages 89-103.
    9. Batchimeg Sambalaibat, 2012. "Credit Default Swaps and Sovereign Debt with Moral Hazard and Debt Renegotiation," 2012 Meeting Papers 1093, Society for Economic Dynamics.
    10. Michael Adler & Jeong Song, 2010. "The behavior of emerging market sovereigns' credit default swap premiums and bond yield spreads," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 15(1), pages 31-58.
    11. Franck Packer & Haibin Zhu, 2005. "Contractual terms and CDS pricing," BIS Quarterly Review, Bank for International Settlements, March.
    12. Rahmi Erdem Aktug & Geraldo Vasconcellos & Youngsoo Bae, 2012. "The dynamics of sovereign credit default swap and bond markets: empirical evidence from the 2001 to 2007 period," Applied Economics Letters, Taylor & Francis Journals, vol. 19(3), pages 251-259, February.
    13. Consiglio, Andrea & Lotfi, Somayyeh & Zenios, Stavros A., 2016. "Portfolio Diversification in the Sovereign Credit Swap Markets," Working Papers 16-06, University of Pennsylvania, Wharton School, Weiss Center.
    14. Manmohan Singh & Jochen R. Andritzky, 2006. "The Pricing of Credit Default Swaps During Distress," IMF Working Papers 06/254, International Monetary Fund.
    15. Zinna, Gabriele, 2013. "Sovereign default risk premia: Evidence from the default swap market," Journal of Empirical Finance, Elsevier, pages 15-35.
    16. 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.

    More about this item

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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