The Latest Credit Default Swap Industry Statistics Explained
The global credit default swap (CDS) market was valued at approximately $9.4 trillion in 2019.
The statistic of the global credit default swap (CDS) market being valued at approximately $9.4 trillion in 2019 indicates the total outstanding contracts in the market that provide insurance against the default of a borrower. CDS are financial derivatives used by investors and institutions as a way to hedge against credit risk or speculate on the creditworthiness of a particular entity. A larger market size indicates a greater level of risk exposure and financial activity, as CDS can be seen as a measure of the overall health of the financial system and economy. This $9.4 trillion figure highlights the significant role that CDS play in the global financial markets and underscores the importance of monitoring and regulating these instruments to maintain financial stability.
The United States accounted for the largest share of credit default swaps outstanding in 2019, with approximately 44% of the global total.
The statistic indicates that in 2019, the United States held the highest proportion of credit default swaps (CDS) among all countries worldwide, representing approximately 44% of the total global CDS market. Credit default swaps are financial instruments used for hedging against the risk of default on loans or bonds. The significant share held by the United States suggests the country’s role as a key player in the global financial system and highlights the importance of its institutions and markets in managing credit risk. This statistic underscores the country’s prominence and influence in terms of financial risk management on a global scale.
Europe had the second highest market concentration of CDS at about 24% in 2019.
This statistic indicates that in 2019, Europe had the second highest market concentration of Credit Default Swaps (CDS) globally, accounting for approximately 24% of the total market share. Market concentration refers to the proportion of CDS transactions in a particular region compared to the overall market activity. A high market concentration suggests that a significant portion of CDS trading is concentrated in Europe, reflecting the region’s role in the global financial markets and the prevalence of derivative instruments in its financial system. Understanding market concentration can provide insights into the level of risk exposure and financial stability within the region’s markets.
Among index credit default swaps, Markit CDX.NA.IG was the most actively cleared in 2019.
This statistic indicates that among a collection of index credit default swaps (CDX) in the North American investment-grade market, the Markit CDX.NA.IG index was the most actively traded and cleared throughout the year 2019. This suggests that this particular CDX index was in high demand among investors looking to hedge against credit risk or speculate on credit events within the North American investment-grade market. The high trading volume and clearance activity surrounding the Markit CDX.NA.IG index reflect its significance and popularity within the financial markets during the specified time period.
The single-name sector (CDS contracts that reference one single entity) made up close to $4.8 trillion of the global CDS market in the second half of 2019.
This statistic indicates that the single-name sector, which comprises credit default swap (CDS) contracts referencing a single entity, accounted for approximately $4.8 trillion of the overall global CDS market activity during the latter half of 2019. This suggests significant market exposure and risk concentration towards specific entities within financial systems during that period. The prominence of the single-name sector in the CDS market may reflect the degree of hedging, speculation, or investment being undertaken by market participants on the creditworthiness of individual entities. Monitoring and understanding the dynamics within the single-name sector are crucial for assessing systemic risk and potential contagion effects stemming from credit events affecting specific entities.
The volume of CDS contracts referencing sovereign debt amounted to $1.9 trillion at the end of 2019.
The statistic indicates that the total value of credit default swap (CDS) contracts that are tied to sovereign debt reached $1.9 trillion by the conclusion of 2019. CDS contracts are financial instruments that provide investors protection against the default of the underlying bond or security. The substantial volume of CDS contracts referencing sovereign debt suggests that investors were concerned about the creditworthiness or default risk of various governments during that period. This statistic highlights the importance of credit risk management and the role of CDS contracts in the financial markets, as well as the overall perception of sovereign debt stability in the global economy.
In terms of sector, financial firms represented 30% of single-name CDS contracts as of the second half of 2019.
This statistic indicates that among all single-name credit default swaps (CDS) contracts traded during the second half of 2019, financial firms accounted for 30% of the total. CDS contracts are financial instruments that provide protection against the default of a specific borrower, such as a corporation or government entity. The fact that financial firms represented a significant portion of these contracts implies that the sector may have been perceived as having higher credit risk or volatility. This information can be valuable for investors, risk managers, and policymakers in assessing the overall health and stability of the financial sector during that period.
By the end of 2018, central counterparties (CCPs) cleared around 60% of the notional amount of CDS worldwide.
This statistic indicates that central counterparties (CCPs) played a significant role in clearing credit default swaps (CDS) transactions globally by the end of 2018. The term “notional amount” refers to the total face value of the CDS contracts being cleared by CCPs. The fact that CCPs cleared around 60% of this notional amount suggests that they were responsible for processing a substantial majority of CDS trades, providing risk management services, and acting as intermediaries between buyers and sellers in the market. This statistic highlights the increasing reliance on CCPs to enhance transparency, reduce counterparty risk, and improve overall stability in the CDS market.
JPMorgan Chase was the top holder of CDS as of late 2018, with $1.1 trillion in notional holdings.
The statistic that JPMorgan Chase was the top holder of Credit Default Swaps (CDS) as of late 2018, with $1.1 trillion in notional holdings indicates that the bank had significant exposure to credit risk through its holdings of CDS contracts. CDS are financial instruments that provide insurance against the default of a borrower, and as the top holder, JPMorgan Chase was seen as having a large stake in the performance of these instruments. The notional value of $1.1 trillion represents the total value of the underlying assets covered by the CDS contracts, rather than the actual amount at risk for the bank. Nonetheless, this statistic highlights JPMorgan Chase’s involvement in the CDS market and its potential exposure to credit events impacting the financial system.
In 2018, 87% of the credit default swaps in the United States market were bought by banks.
The statistic ‘In 2018, 87% of the credit default swaps in the United States market were bought by banks’ indicates that a significant majority of credit default swaps, a type of financial derivative, were purchased by banks within the U.S. financial markets during that year. Credit default swaps are essentially insurance contracts against the default of a specific borrower or issuer, and the high percentage suggests that banks were actively engaging in managing credit risk through these instruments. This statistic highlights the prominent role that banks play in managing and mitigating credit risk within the financial system, as well as the reliance on derivatives for risk management purposes.
The size of the single-name CDS market in North America was $3.9 trillion in the first half of 2019.
The statistic indicates that the size of the single-name Credit Default Swap (CDS) market in North America reached $3.9 trillion in the first half of 2019. This reflects the total notional value of outstanding CDS contracts on individual entities like corporations, governments, or other entities in North America during that period. CDS are financial instruments that provide protection against the default of a specific issuer of debt, and the market size provides an indication of the amount of risk protection and speculation that market participants are engaging in within the region. A $3.9 trillion market size suggests significant activity and exposure to credit risk in North America during the first half of 2019.
Among emerging market economies, South Korea had the highest percentage of locally headquartered counterparties involved in CDS transactions in 2019, at about 45%.
The statistic indicates that in 2019, among emerging market economies, South Korea had the highest proportion of locally based entities engaging in Credit Default Swap (CDS) transactions, with approximately 45% of counterparties being headquartered within the country. This suggests a significant level of domestic participation in CDS markets within South Korea compared to other emerging economies. CDS transactions are a type of financial derivative used to hedge against credit risk or speculate on credit events, and the high percentage of locally headquartered counterparties may reflect the maturity and depth of the financial markets in South Korea, as well as a strong understanding and utilization of financial instruments among domestic institutions.
At the end of June 2018, Dealer firms in the United States held the largest amount of CDS contracts, at $2.5 trillion.
This statistic indicates that as of the end of June 2018, Dealer firms in the United States held the highest total value of Credit Default Swap (CDS) contracts among all market participants, amounting to $2.5 trillion. Dealer firms act as intermediaries in the financial markets, facilitating the trading of various financial instruments, including CDS contracts which are essentially insurance against the default of a borrower. The substantial value of CDS contracts held by Dealer firms may signify their significant presence and role in the derivatives market, as well as their exposure to credit risk associated with these contracts. This statistic highlights the importance of Dealer firms in the financial system and their impact on market dynamics related to credit risk management.
Single contracts on UK issuers dominate the index CDS market, accounting for around USD 1.1 trillion of the total notional amount in 2018.
This statistic indicates that individual contracts on UK issuers hold a significant share of the index credit default swap (CDS) market, making up approximately USD 1.1 trillion of the total notional amount in 2018. This suggests a higher level of exposure and risk associated with UK issuers within the CDS market compared to other regions. The dominance of single contracts on UK issuers signifies the importance and influence of these entities on the overall market dynamics and potentially reflects the perceived creditworthiness and economic stability of the UK as a whole. Therefore, investors and market participants closely monitor and analyze the credit risk associated with UK issuers when making investment decisions in the CDS market.
At the end of 2020, the ten major global dealers were the counterparties to almost 90% of reported credit default swaps.
This statistic indicates that the global credit default swap (CDS) market is highly concentrated among a small number of major dealers, with the top ten firms acting as counterparties for nearly 90% of reported CDS transactions by the end of 2020. This level of concentration suggests that these dealers play a dominant role in the CDS market, potentially exerting significant influence over pricing, liquidity, and overall market dynamics. As key market participants, these major dealers are likely to have a significant impact on the stability and functioning of the global CDS market, making their actions and decisions crucial factors to monitor for regulators and market participants alike.
At the end of 2019, issuers from advanced economies accounted for slightly below 90% of single-name CDS notional amounts outstanding.
This statistic implies that by the end of 2019, the total notional amount of single-name Credit Default Swaps (CDS) outstanding was dominated by issuers from advanced economies, representing almost 90% of the overall market. Single-name CDS are financial derivatives used to hedge against the default of a specific company or entity. The fact that issuers from advanced economies hold a significant portion of the single-name CDS market highlights the prevalence and importance of these financial instruments within the global financial system. Additionally, it suggests that investors and market participants in advanced economies are actively engaging in risk management and hedging strategies through the use of CDS, indicating a level of sophistication and awareness of financial risk in these markets.
Conclusion
The analysis of Credit Default Swap industry statistics reveals important trends and insights into the overall health and stability of financial markets. By closely monitoring key metrics and data points, stakeholders can make more informed decisions and mitigate risks associated with credit default swaps. Continued research and analysis in this area are essential for fostering a more transparent and resilient financial system.
References
0. – https://www.www.sifma.org
1. – https://www.www.bis.org
2. – https://www.www.isda.org
3. – https://www.corpgov.law.harvard.edu
4. – https://www.www.ft.com
5. – https://www.www.banque-france.fr
