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Market Research from Yield
Curve.com |
The credit
default swap basis: analysing
the interplay between
cash and synthetic markets,
published in the 2003/04
Euromoney Derivatives
Yearbook. |
| In this
article we consider the
close relationship between
the synthetic and cash
markets in corporate credit.
This relationship manifests
itself most clearly in
the shape of the credit
default swap basis, the
difference between the
cash market asset swap
spread and the same-reference
credit default swap spread. |
| First, we
consider briefly why the
synthetic market price
spread will necessarily
differ from the cash spread. |
| We then
look in further detail
at the factors that drive
the basis and the implications
this has for market participants. |
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