Titlebook: Credit Default Swaps; Mechanics and Empiri Christopher L. Culp,Andria van der Merwe,Bettina J Book 2018 The Editor(s) (if applicable) and T

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Asset-Backed CDSsugh such asset-backed CDSs (“ABCDSs”) have virtually disappeared since the outbreak of the credit crisis, the fundamental idea behind pay-as-you-go ABCDSs is sound, and such products could well re-emerge again (albeit not necessarily based on US subprime mortgage-based ABSs).

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Potential Benefits of CDSsmation to CDS users and other market participants about the expected default risks, recovery rates, potential interconnectedness, and other aspects of underlying reference names. We discuss here these potential benefits of CDSs.

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Inter-Market Basis Relations of single-name CDS trading initially has adverse impacts on the liquidity of related debt and equity markets, but that those effects are transitory and may be later reversed as the related markets reach a joint equilibrium.

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Interconnectedness and Systemic Risktransmission mechanisms for economic shocks but not generally a cause of those shocks; and (iii) a “sovereign-bank” loop integrates the financial condition of the banking sector with sovereign credit risks.

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Single-Name CDSses issued by an underlying reference entity from credit protection purchasers to sellers. Underlying reference names include corporations, sovereigns, and other borrowers. Payments by protections sellers to purchasers are based on the occurrence of any of several credit events, as defined in the doc

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Loan-Only CDSs are based. We then review the significant distinctions between single-name CDSs (typically based on bonds issued by reference entities) and LCDSs with loan-specific deliverable obligations. Such distinctions include reference entity credit events that trigger LCDSs, the timing of coupon payments on

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Asset-Backed CDSsbased ABSs, and tranches of collateralized debt obligations (“CDOs”)) are not amenable to the same ISDA credit definitions applied to single-name CDSs based on specific reference entities. To address the specialized nature of CDSs backed by ABSs, ISDA published in 2005 and 2006 “pay-as-you-go” docum