GLOBAL FINANCIAL CRISIS: SHOULD CREDIT DEFAULT SWAP BE MADE RESPONSIBLE

Lax monetary policy, sub prime lending, asset securitization, high leverage, role of credit rating agencies, fair value accounting and credit derivative products in general had been identified as an inclusive list of reasons behind global financial crisis. However, credit default swap (CDS) had been marked as the single most heinous reason by Google, Alan Greenspan, and Warren Buffet. On the other hand financial economists in general have found many advantages of CDS including enhancing liquidity, price discovery mechanisms and others.
On 4th August 2010 Reserve Bank of India has issued the draft report of the Internal Group on introduction of Credit Default Swap for Corporate Bonds for public comments. Keeping global financial crisis in mind we have become apprehensive about this product. Our study has been classified in two parts. In Part-A we have studied the basic concepts of (i) credit risk, (ii) credit derivative products in general and credit default swap in particular and (iii) valuation of credit default swap through mathematical model and numerical example. Based on the famous exploratory study by Rene M. Stutz, we have made a humble attempt to argue whether CDS has aggravated the recent global financial crisis in Part- B.

宽松的货币政策、次级贷款、资产证券化、高杠杆、信用评级机构的作用、公允价值会计以及信用衍生产品在总体上已被识别为引发全球金融危机的诸多原因。然而，谷歌、艾伦·格林斯潘和沃伦·巴菲特将其标记为最为恶劣的单个原因。另一方面，金融经济学家普遍认为信用违约互换（CDS）具有诸多优势，包括增强流动性、价格发现机制等。2010年8月4日，印度储备银行发布了内部小组关于引入信用违约互换用于企业债券的草案报告，供公众评论。鉴于全球金融危机的影响，我们对这一产品产生了担忧。本研究分为两部分。在第一部分中，我们研究了（i）信用风险、（ii）一般性的信用衍生产品以及特别地信用违约互换的基本概念，以及（iii）通过数学模型和数值实例对信用违约互换进行估值。基于雷内·M·斯图茨的著名探索性研究，我们在第二部分中谦逊地尝试论证CDS是否加剧了最近的全球金融危机。