Empty investor theory “dubious” says Isda

The International Swaps and Derivatives Association has dismissed the theory that some CDS holders use the instruments to force reference entities into bankruptcy and profit from their demise as “based on an analogy of dubious validity”.

In a 16-page research note published on December 17, Isda explores the factual basis for the “empty creditor” hypothesis put forward by Henry Hu and Bernard Black, law professors at the University of Texas.

The trade body concluded the theory is without empirica

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