#2568. Credit default swaps and corporate bond trading

November 2026publication date
Proposal available till 30-05-2025
4 total number of authors per manuscript4010 $

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Journal’s subject area:
Finance;
Economics and Econometrics;
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Abstract:
This article examines regulatory data on CDS holdings and corporate bond transactions, providing evidence for the effect of liquidity spillovers from CDS into bond markets. Bond trading volumes are 70% higher for investors with CDS positions registered to the debt issuer. In addition, the higher trading activity of CDS significantly increases the liquidity of the underlying bonds, especially in the context of the downgrade. Additional analysis shows that the spillover effect is partly due to open positions on CDS, highlighting one of the adverse effects of a ban on open CDS on bond markets. The results show that having an affordable CDS market increases the liquidity of the underlying bond market.
Keywords:
Corporate bonds; Credit default swaps; Liquidity; Regulation; Trading volumes

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