I was trying to figure out all different factors for the difference between CDS and bond basis. I got Lehman Brothers research paper on this. In the paper the aim is to explore the differences between the cash and default swap markets for a given credit and develop a frame-work for looking at these differences. Ultimately, the goal is to enable the reader to identify and understand the many reasons for the divergence between the two markets and to give the reader the tools to evaluate it.
Broadly reasons for this spread can be divided into Fundamental factors and Market driven factors. Fundamental factors are fundamental difference between the CDS and it's replication using the Bond and asset swap spread products.
Market factors refers to the nature of the market in which the cash and defaults swaps gets traded and so include the demand , supply and liquidity.
Broadly reasons for this spread can be divided into Fundamental factors and Market driven factors. Fundamental factors are fundamental difference between the CDS and it's replication using the Bond and asset swap spread products.
Market factors refers to the nature of the market in which the cash and defaults swaps gets traded and so include the demand , supply and liquidity.
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