In over-the-counter markets, dealers facilitate trade by providing liquidity and acting as intermediaries. We use proprietary data on US single-name credit default swap trades and positions to study how dealer intermediation networks shape liquidity. For each reference entity, we reconstruct interdealer and dealer-to-client networks and introduce Shapley value-based measures of dealer and market connectivity. We present a cooperative game framework that links these measures to predictions for the liquidity that dealers provide at both individual and market levels. Empirically, we find that Shapley values are strongly associated with trade volumes, inventory management, execution costs, and bid–ask spreads

We develop a credit-risk based framework for macroprudential policy that treats systemic risk as the credit exposure of a policymaker to a portfolio of supervised banks. Using a structural credit model estimated from Credit Default Swap (CDS) prices, we derive the socially optimal capital buffers per bank by balancing the benefits of lower systemic risk against the economic costs of higher capital requirements through reduced credit supply. Applying this framework to Europe’s systemic banks, we find that the market-based optimal buffers are substantially higher than those currently in use and vary significantly across institutions. Conditional on current country averages, within-country buffers are aligned close to optimally; suboptimality mostly arises from substantial differences between country averages