Market Liquidity in a Natural Experiment: Evidence from CDS Standard Coupons

IF 3.9 2区经济学 Q1 Economics, Econometrics and Finance

Journal of Financial and Quantitative Analysis Pub Date : 2024-03-01 DOI:10.1017/s0022109024000176

Xinjie Wang, Ge Wu, Z. Zhong

引用次数: 0

Abstract

The CDS Big Bang introduced two standard coupons for CDS trading. We exploit the setting of the two standard coupons as a natural experiment to quantify the components of the bid-ask spreads in over-the-counter markets. We find that a significant portion of the difference in the bid-ask spread between the two coupons is explained by the difference in funding costs. Furthermore, search intensity also explains the variation in the difference in bid-ask spread. The liquidity typically concentrates on one of the standard coupons and can suddenly switch to the other coupon. Using the sudden switch of the primary coupon, we provide further evidence to support the predictions of search-based liquidity models.

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自然实验中的市场流动性：CDS 标准票据的证据

CDS 大爆炸为 CDS 交易引入了两个标准券。我们利用这两种标准息票的设定作为自然实验，量化场外市场买卖价差的组成部分。我们发现，两个标准券之间的买卖价差很大一部分是由融资成本的差异造成的。此外，搜索强度也能解释买卖价差的差异。流动性通常集中在其中一个标准券上，也可能突然切换到另一个券上。通过主券的突然切换，我们为支持基于搜索的流动性模型的预测提供了进一步的证据。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Journal of Financial and Quantitative Analysis Multiple-

CiteScore

6.60

自引率

5.10%

发文量

131

期刊介绍： The Journal of Financial and Quantitative Analysis (JFQA) publishes theoretical and empirical research in financial economics. Topics include corporate finance, investments, capital and security markets, and quantitative methods of particular relevance to financial researchers. With a circulation of 3000 libraries, firms, and individuals in 70 nations, the JFQA serves an international community of sophisticated finance scholars—academics and practitioners alike. The JFQA prints less than 10% of the more than 600 unsolicited manuscripts submitted annually. An intensive blind review process and exacting editorial standards contribute to the JFQA’s reputation as a top finance journal.