Abstract
We consider the moral hazard incentives of the CDS (Credit Default Swap) buyer and seller simultaneously and show that the CDS trading raises both the seller and buyer’s moral hazard incentive compared with the situation without the CDS trading. Moreover, we demonstrate that the effects of strengthening the capital requirement with CDS are distinct from the circumstance without the CDS trading, which should be taken into account in the capital regulation.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
