CDS auctions improve settlement efficiency
Credit default swap (CDS) auctions have the potential to enhance the efficiency of settlement, new research from the New York Federal Reserve reveals.
The analysis shows that auctions improve the efficiency of the settlement process by reducing the cash flow required to settle the CDS contracts, as the net value tends to be substantially smaller than the gross value of these contracts.
The research also finds that CDS auctions make it more likely that all CDS contracts will be settled at a single
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