An Analysis of CDS Market Liquidity by the Hawkes Process
We study the credit default swap (CDS) markets in the U.S. and Japan, focusing on bid-ask spreads which are closely related to the liquidity of the markets. Since bid-ask spreads dramatically surged during the financial crisis (2008-2009) and the market became very illiquid, it is crucially important to investigate how bid-ask spreads fluctuate. In this paper, not only do we make dynamic analysis of the bid-ask spreads in both countries but propose a model to predict bid-ask spreads via the self-exciting intensity process (the Hawkes process).
|Date of creation:||Jun 2013|
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- Jan Ericsson & Olivier Renault, 2006.
"Liquidity and Credit Risk,"
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- Olivier Renault & Jan Ericsson, 2000. "Liquidity and Credit Risk," FMG Discussion Papers dp362, Financial Markets Group.
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- Acharya, Viral V. & Johnson, Timothy C., 2007. "Insider trading in credit derivatives," Journal of Financial Economics, Elsevier, vol. 84(1), pages 110-141, April.
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