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Standardization of Credit Default Swaps Market

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  • Tommaso Colozza

Abstract

Standardization of credit derivatives was a necessary step towards a more transparent and better structured market, especially after recent financial turmoil. In this survey, we sum up the enhancements established by ISDA in 2009, focusing on vanilla instruments (Credit Default Swaps). New contract features include changes in the cash flow and in post-default settlement mechanisms, where auctions are now provided; an exhaustive description of such features acts as a basis for quantitative analysis of this standard market. A rigorous depiction of the conversion mechanism, the ISDA CDS Standard model, is also provided.

Suggested Citation

  • Tommaso Colozza, 2014. "Standardization of Credit Default Swaps Market," Discussion Papers 2014/190, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    • Handle: RePEc:pie:dsedps:2014/190
    Note: ISSN 2039-1854
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    File URL: https://www.ec.unipi.it/documents/Ricerca/papers/2014-190.pdf
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    References listed on IDEAS

    as
    1. Nicholas Vause, 2010. "Counterparty risk and contract volumes in the credit default swap market," BIS Quarterly Review, Bank for International Settlements, December.
    2. Haibin Zhu, 2004. "An empirical comparison of credit spreads between the bond market and the credit default swap market," BIS Working Papers 160, Bank for International Settlements.
    3. Antonio Di Cesare & Giuseppe Grande & Michele Manna & Marco Taboga, 2012. "Recent estimates of sovereign risk premia for euro-area countries," Questioni di Economia e Finanza (Occasional Papers) 128, Bank of Italy, Economic Research and International Relations Area.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Credit Default Swaps; Standardization; ISDA CDS Model; Upfront; Auction Settlement.;
    All these keywords.

    JEL classification:

    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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