Journal of Financial Economics Vol. 84 No. 1 2007
Insider trading in credit derivatives☆
Abstract
Insider trading in the credit derivatives market has become a significant concern for regulators and participants. This paper attempts to quantify the problem. Using news reflected in the stock market as a benchmark for public information, we find significant incremental information revelation in the credit default swap market under circumstances consistent with the use of non-public information by informed banks. The information revelation occurs only for negative credit news and for entities that subsequently experience adverse shocks, and increases with the number of a firm's relationship banks. We find no evidence, however, that the degree of asymmetric information adversely affects prices or liquidity in either the equity or credit markets.
- DOI
- 10.1016/j.jfineco.2006.05.003
- Volume
- 84
- Issue
- 1
- Pages
- 110-141
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref