What’s driving the default swap basis?

By Viktor Hjort

credit-derivatives-book
This article was first published as a chapter in Credit Derivatives, by Risk Books.

INTRODUCTION

The significant growth seen in the credit default swap (CDS) market has been driven to a great extent by its role as a proxy for the bond and loan market. Although the default swap market adds value for many investors by providing access to credits not readily available in the cash markets, its main importance is as an instrument that allows investors to isolate credit risk from interest and fundin

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