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【Seminars on Finance and Economics】Prof. Yangru Wu's lecture notice

Publish Date: 2017/03/07 17:36:15    Hits:

TopicFunding Liquidity Shocks in a Natural Experiment:Evidence from the

CDS Big Bang

SpeakerYangru Wu, RutgersUniveristy

Host:Professor Li Ping

Time:2017.3.16,10:00

Location:New Main Building A1048

 

Abstract:

The CDS Big Bang (the protocol changes for the CDS market in April 2009) 

increased the upfront funding requirements for trading CDS contracts,

especially for those with credit spreads further away from 100 and 500 basis

points. Exploiting this natural experiment, we document direct evidence that a

higher funding requirement reduces market liquidity, increases the absolute

value of the CDS-bond basis, and CDS spread volatility. Our evidence highlights

an unintended consequence of the ongoing standardization of OTC markets—while

its intention is to reduce systemic risk, standardization may jeopardize market

liquidity precisely during periods of financial distress.

About the speaker:

Yangru Wu is Professor of

Finance and Director of the Master of Quantitative Finance Program at the

Rutgers Business School. He received his Ph.D. from the Ohio State University

in 1993. His current research interest areas are international finance and

empirical asset pricing. He has published over 50 articles in numerous

scholastic journals, including Journal of Finance, International Economics

Review, Journal of Monetary Economics, Journal of Money Credit & Banking,

and Biometrika.