CDS trading raises probability of default: NY Fed paper


A New York Federal Reserve paper published on Wednesday said firms with traded credit default swaps (CDSs) have a higher probability of default.

Stavros Peristiani and Vanessa Savino, the paper's authors, used data on CDSs between 2001 and 2008 to examine whether CDS trading amplifies corporate distress risks and if companies with traded CDS positions on their debt are more likely to default.

While the results did not generally find a persistent link between CDS and default, the report showed

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