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Title: CDS and Credit: After the Bangs Cheaper Credit Insurance, More Lending and Hedging

Author(s): Yalin Gündüz, Steven Ongena, Günseli Tümer-Alkan and Yuejuan Yu

Publication Date: November 2021

Keyword(s):

Programme Area(s): Financial Economics

Abstract: Does the cost of credit insurance affect the availability of credit? To answer this question, we couple comprehensive bank-firm level CDS trading data from DTCC to the German credit register containing bilateral bank-firm credit exposures. We assess the differential impact on market participants of the "Big Bang" and "Small Bang" standardization across CDS markets. We find that after the Bangs, the cost of buying CDS contracts becomes lower for non-dealer banks, and that â?? because of this decrease in insurance cost â?? these banks extend more credit to CDS traded and affected firms, and also hedge more effectively.

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Bibliographic Reference

Gündüz, Y, Ongena, S, Tümer-Alkan, G and Yu, Y. 2021. 'CDS and Credit: After the Bangs Cheaper Credit Insurance, More Lending and Hedging'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=16744