CREDIT DEFAULT SWAPS – WEAPON OF MASS DESTRUCTION OR RELIABLE INDICATOR?

Authors


Dennis Sebastian Klieber is at Yale University (dennis.klieber@yale.edu).

Abstract

Credit Default Swaps (CDS) are said to increase systemic vulnerability, but they also serve as an ex-ante indicator of default probabilities, more finely-tuned and more responsive than ratings agency reports. And they provide a useful mechanism for trading risk and an incentive for good management by businesses and governments.

Ancillary