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CDS Price Volatility Shows The Limits Of Regulation [Study]

A recent working paper from the Treasury’s Office of Financial Research found that the high concentration of credit default swap (CDS) buyers (about five cover half the market) adds to price volatility because idiosyncratic shocks to one of the ‘megasellers’ has such a big impact on spreads.

“Fluctuations of the five largest sellers in the market account for nearly one-ninth of the variation in weekly CDS spread movements . . .


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