Tipping point?

The global financial crisis has demonstrated the Australian credit default swap market is more liquid than its counterparts in the rest of Asia. Nonetheless, Australian investors have failed to take advantage of large arbitrage opportunities and the market is still dominated by offshore entities. Sarfraz Thind reports

Australia’s credit derivatives market has proven relatively buoyant throughout the financial crisis. Credit default swaps (CDSs) were still liquid during the worst of the market turmoil in 2008 and early 2009, which decimated CDS volumes in other parts of the region. According to statistics published by the Australian Financial Markets Association (Afma), Australian CDS volumes grew by 30% between 2008 and 2009, reaching A$332 billion ($310 billion) at the end of last year. Indeed, credit