Unlocking Credit Default Swaps to the Retail Investors to Boost Liquidity and Risk Diversification
description: Credit Default Swaps, is one of the significant contributors to the 2008 financial crash due to raise of illiquidity and its limited space to mitigate the risk, the market is dictated by few institutions across the globe. Hence the research investigates realistically by probing the credit default swaps role and contribution in the financial crash, existing gaps and current mechanism of the credit default swaps, as a result we anticipate the outcome might force us restructure the existing mechanism or possible innovative alternate models in order to boost the liquidity and to establish robust platform which helps to minimize the counterparty risk. Financial tsunami in the year 2008, alarmed researchers, regulators, economists, sovereigns and financial institutions across the globe to emphasize on the need of strong liquidity and risk mitigation or diversification model(s) for credit default swaps market reformation and the development along with creating superior confidence levels in the market. The literature review of the research acknowledged that the existing financial institutions and researchers analyzed and articulated the need of the retail investors participation in the credit default swaps market to create a strong liquidity and to mitigate counterparty risk. The anticipated restructuring or possible innovative alternate models may help to reform and to maintain the development of the credit default swaps market and also provoke superior confidence levels to boost strong liquidity and options to diversify the associated risk. The outcome of this research may also motivate the investments in the debt market which helps to enhance the debt capital markets and economies around the globe. Finally we verify the liquidity strength and degree of risk with the help of research proxies; the proxies are width of the bid and ask spread of the research outcome, as we strongly believe bid and ask spread have self illustrative power to explain the degree of liquidity and…
creator: Reddy A Yekanth
source: Management
date: 2013