The rise and fall of credit default swaps: an empirical investigation of global banks and non-bank financial institutions

The thesis investigates the possible causes for the phenomenal growth, and the eventual collapse, of one of the biggest and complex financial innovations of the 21st century, the Credit Default Swap (CDS). The study is conducted within the context of the global financial crisis, in banks and non-bank financial institutions around the world. The findings of this study have many policy implications. In particular, financial regulators can monitor risk taking activity of banks through CDS prices without unduly constraining risk taking. Findings also suggest that it is the self-interest of managers that promotes risk taking, which has eventually led to the self-destruction of the CDS market.