Research On Liquidity Risk Of Debt Default Swap Based On Model Average Method

As a common-used financial risk transfer instrument,CDS plays a key role from the perspective of securitization and financial risk control.Although CDS makes great contribution to the individuals,companies,and even the countries,the proliferation of the CDS and naked CDS is also regarded as the culprit of the 2007 financial crisis and the sovereign debt crisis.As the development of the economic globalization,the pace of securitization in China is accelerating,and the function of CDS will make more effect on our financial market.This essay,basing on the characteristic of CDS and constituents of the risk of CDS,emphasizes on the liquidity risk,in addition,the role of CDS in 2007 financial risk and sovereign debt risk is considered too.When analyzing the liquidity risk,we use the volume of trade of CDS as the indicator of the liquidity,as for the risk factor,we take into account the supply of currency,the GDP,the amount of the newly-issued bond,standard poor's indices and the risk-free interest,at the same time,the Model averaging,which is a emerging way in the Statistics and econometrics area,is used to analyze the effect that the selected risk factors make on the CDS's liquidity,in the meantime,when selecting the weight of different models,four ways,including OPT,JMA,AIC,BIC were used.Furthermore,the ways of restricting the over-development of CDS,which are taken after the 2007 financial risk and European sovereign debt risk,are studied,at the same time,the transformation of the relevant transaction and disclosure principles are taken in to account as well,finally,some proposals of facilitating the development of CDS in our country,are proposed.