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Overpricing in Emerging Market Credit-Default-Swap Contracts Some Evidence from Recent Distress Cases

Since recent debt restructurings that constitute credit events have been more frequent than outright defaults, sovereign bond prices may not collapse during distress. In this case, the likely high recovery values after restructuring suggest that the cost of credit-default-swap (CDS) contracts to the...

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Bibliographic Details
Main Author: Andritzky, Jochen
Other Authors: Singh, Manmohan
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2005
Series:IMF Working Papers
Subjects:
Government And The Monetary System
Payment Systems
Credit
Finance
Regimes
Monetary Economics
Monetary Policy, Central Banking, And The Supply Of Money And Credit: General
General Financial Markets: General (includes Measurement And Data)
Investments: Bonds
Money
Standards
Emerging And Frontier Financial Markets
Bonds
Currencies
Monetary Systems
Credit Default Swap
Financial Services Industry
Investment & Securities
Money And Monetary Policy
Finance: General
Uruguay
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
Description
Summary:Since recent debt restructurings that constitute credit events have been more frequent than outright defaults, sovereign bond prices may not collapse during distress. In this case, the likely high recovery values after restructuring suggest that the cost of credit-default-swap (CDS) contracts to the buyer (as measured by CDS spreads) may be higher than warranted. We estimate the extent of such overpricing by using the cheapest-to-deliver (CTD) bond as a proxy for the recovery-value assumption
Physical Description:13 pages
ISBN:9781451861440

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