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The Rise of Credit Default Swaps and Its Implications on Financial Stability

The Rise of Credit Default Swaps and Its Implications on Financial Stability

Fatma Sezer Dural
Copyright: © 2018 |Pages: 15
ISBN13: 9781522539322|ISBN10: 1522539328|EISBN13: 9781522539339
DOI: 10.4018/978-1-5225-3932-2.ch017
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MLA

Dural, Fatma Sezer. "The Rise of Credit Default Swaps and Its Implications on Financial Stability." Risk and Contingency Management: Breakthroughs in Research and Practice, edited by Information Resources Management Association, IGI Global, 2018, pp. 336-350. https://doi.org/10.4018/978-1-5225-3932-2.ch017

APA

Dural, F. S. (2018). The Rise of Credit Default Swaps and Its Implications on Financial Stability. In I. Management Association (Ed.), Risk and Contingency Management: Breakthroughs in Research and Practice (pp. 336-350). IGI Global. https://doi.org/10.4018/978-1-5225-3932-2.ch017

Chicago

Dural, Fatma Sezer. "The Rise of Credit Default Swaps and Its Implications on Financial Stability." In Risk and Contingency Management: Breakthroughs in Research and Practice, edited by Information Resources Management Association, 336-350. Hershey, PA: IGI Global, 2018. https://doi.org/10.4018/978-1-5225-3932-2.ch017

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Abstract

The credit default swap market has experienced an exponential growth in recent decades. Though the fırst credit default swap contract was negotiated in the mid-1990s, the market has enjoyed a surge of popularity beginning in 2003. By the end of June 2013, the outstanding amount reached 24.3 trillion dollars. It is mostly used to transfer or to hedge credit risk. Concurrently with the global credit crisis, several shortcomings in CDS markets have appeared. One of the obvious questions is whether they affect the stability of financial markets. In this context after broader exhibition of credit default swaps market, speculative use of CDS, inception of central counterparty, and transparency of CDS market is handled. As a conclusion, it is true that the CDS market still has some weaknesses, but it is no more prone to be destabilizing than other financial instruments. This is shown in this chapter.

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