Credit Default Swap and Liquidity

Credit Default Swap and Liquidity

Blog Article

The recent global economic downturn that erupted in the mid 2007 saw an increase of the Credit Default Swaps (CDS) by hundred basis points and severe liquidity crunch in the financial sector of CALENDULA the United States.The recession phase highlighted the importance of the liquidity for the investors and underlined the importance of understanding the connection between the liquidity of the market and the credit markets.In depth, this study tries to understand the relation between the liquidity risk in the CDS market and the credit risk.Along the same line of this study, a study conducted on the different Swiss and German companies revealed that credit COASTER risk is not the direct originator of the liquidity risk, but it created by a negative credit shock.

In addition, this paper focuses on the causes that intensified the global crisis of (2007) as well as the macro-prudential policies are highlighted that will prevent a similar type of crisis in the future.