Capital (architecture)

Financial system

Portfolio

Archaeology

Economics

Computer science

Business

Credit default swap index

Credit valuation adjustment

Politics

Geography

Political science

Monetary economics

Financial economics

Finance

Investment (military)

Financial institution

Margin (machine learning)

Credit reference

Credit risk

Machine learning

Credit default swap

History

The Journal of Finance

ABSTRACT Using proprietary credit default swap (CDS) data, I investigate how capital shocks at protection sellers impact pricing in the CDS market. Seller capital shocks—measured as CDS portfolio margin payments—account for 12% of the time‐series variation in weekly spread changes, a significant amount given that standard credit factors account for 18% during my sample. In addition, seller shocks possess information for spreads that is independent of institution‐wide measures of constraints. These findings imply a high degree of market segmentation, and suggest that frictions within specialized financial institutions prevent capital from flowing into the market at shorter horizons.

Limited Investment Capital and Credit Spreads