Publication Type
Master Thesis
Version
publishedVersion
Publication Date
2007
Abstract
The pace at which the Credit default swaps (CDS) has been growing since its inception topped all projections. Despite the rapid growth, there is still room for enhancement of liquidity in the CDS market. Asymmetric information is another concern of investors in CDS market, however, some literature addressed that it may not be as serious as regarded. Bid-ask spreads is commonly used as a proxy of both liquidity and asymmetric information. Our empirical study confirms that CDS bid-ask spread has explanatory power to CDS premium. We then investigate the liquidity component in CDS bid-ask spreads. We use the bond age, bond amount, and bond time-to-maturity as the liquidity measure. We confirm that the bond market and CDS market are closely correlated. However, the composition of CDS bid-ask spread need to be further studied.
Keywords
Bid-Ask Spread, Credit Default Swaps, Liquidity
Degree Awarded
MSc in Finance
Discipline
Portfolio and Security Analysis
Supervisor(s)
WU, Chunchi
Publisher
Singapore Management University
City or Country
Singapore
Citation
CHEN, Yaru.
What Explains Credit Default Swaps Bid-Ask Spread?. (2007).
Available at: https://ink.library.smu.edu.sg/etd_coll/50
Copyright Owner and License
Author
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.