ISSN: 2222-6990
Open access
The market for credit default swaps (CDS) has experienced explosive growth in the past. Credit
default swaps have existed since the early 1990s and the market increased tremendously
starting in 2003. By the end of 2007, the outstanding amount was $62.2 trillion, falling to
$38.6 trillion by the end of 2008. The recent crisis has revealed several shortcomings in CDS
market practices and structure. The purpose of this paper is to explore how the developments of
the CDS market have played an important role in the credit risk markets. In particular, it is
relevant to ascertain whether the CDS markets act as a leading price indicator, and hence, if CDS
spreads provides a valuable market-based assessment of credit conditions.
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