The Impact of Credit Derivatives Issuance on Financial Institutions

This paper analyzes the impact of European Credit Derivatives issuance on the financial market stability. Based on the relationship between CDOs (Collateralized Debt Obligation) issuance volumes, market volatility. Europe 6-month risk-free interest rate and the stability of financial market, this paper uses coexceedances method and the Multiple Logit model. We find that CDOs issuance is positively related to the negative coexceedances, suggesting that the greater amount of CDOs issuance, the greater impact on financial stability. CDOs issuance is not related to the positive coexceedances. indicating that the risk management of banks through CDOs is limited. In addition, the asymmetric information and risk-free interest rate also affect the stability of financial market.