Part I: The CDS Market and Product Mechanics
Chapter 1: Overview of CDS Products and Market Activity
A......... Primary CDS Product Types
1......... Single-Name CDSs
2......... Multi-Name CDSs 3......... Asset-Backed CDSs
B......... Aggregate Market Activity
1......... CDS Notional Amounts Outstanding
2......... CDS Trading Activity
References for Chapter 1 End Notes for Chapter 1
Chapter 2: Single-Name CDSs
A......... Standard Single-Name CDS Terms and Conventions
1......... Underlying Reference Name
2......... Maturity/Tenor
3......... Coupon/Spread/Premium 4......... Credit Events
5......... Settlement Methods
6......... Deliverable Obligations for Single-Name CDSs with Physical or Auction Settlement
B......... Selected Credit Event Determinations
1......... The Argentine Republic (2001) 2......... The Hellenic Republic (2012)
3......... Noble Group Ltd. (2017)
4......... Blackstone-Hovnanian (2017-2018)
References for Chapter 2
End Notes for Chapter 2
Chapter 3: Loan-Only CDSs
A......... The Syndicated Leveraged Loan Market
1......... Syndication and Loan Facilities
2......... The Commoditization of the Leveraged Loan Market
B......... Distinctions between LCDSs and CDSs 1......... Triggering Credit Events
2......... Coupon/Spread
3......... Deliverable Obligations and Settlement Methods
4......... Early Terminations and Bullet LCDSs
References for Chapter 3 End Notes for Chapter 3
Chapter 4: Multi-Name and Index CDSs
A......... Portfolio and Basket Multi-Name CDSs
1......... Portfolio CDSs
2......... Nth-to-Default Basket CDSs
3......... Excess-of-Loss Basket CDSs B......... Index CDSs
1......... Underlying Reference Portfolios
2......... Index Series and Roll Dates
3......... Pricing and Settlement
C......... Tranched Index CDSs
References for Chapter 4
End Notes for Chapter 4
Chapter 5: Asset-Backed CDSs
A......... Structured Finance and ABSs
1......... Special Purpose Entities
2......... Types of Securitizations
B......... Typical ABSs 1......... RMBSs and Home Equity Loan-Backed ABSs 2......... CDOs
C......... Asset-Backed CDSs Under the 2003 Definitions
1......... SPE Issuers and Credit Events Under the 2003 Definitions
2......... Complications Arising from ABS Structures
D......... The ISDA PAUG Template 1......... ABCDSs 2......... CDSs on CDO Tranches
References for Chapter 5
End Notes for Chapter 5
Chapter 6: CDS Execution and Clearing Mechanisms
A......... CDS Clearing
1......... U.S.
2......... E.U.
3......... Market Activity
B......... CDS Trade Execution
1......... U.S.
2......... E.U. 3......... Market Activity
References for Chapter 6
End Notes for Chapter 6
Part II: Potential Benefits and Costs of CDSs Chapter 7: Potential Benefits of CDSs
A......... Credit Risk Transfer
1......... Realized Default Risk
2......... Mark-to-Market Risk B......... Increased Supply of Loanable Funds
C......... Synthetic Bond Investments
D......... Price Discovery and Information Aggregation
References for Chapter 7
End Notes for Chapter 7
Chapter 8: Potential Costs of CDSs
A......... Increased Risk-Taking and Diminished Monitoring by Banks
B......... Empty Creditors, Negative Economic Interests, and Strategic Defaults
About the Author:
Christopher L. Culp, Ph.D., is a Research Fellow at the Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise, an Adjunct Professor at both the Swiss Finance Institute and Universität Bern, a Senior Affiliate with Compass Lexecon, and Managing Director of Financial Economics Consulting, Inc.
Andria van der Merwe, Ph.D., is a Senior Vice President at Compass Lexecon and a Research Fellow at the Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise.
Bettina Stӓrkle, M.Sc., is an Economist with Compass Lexecon.
