ABSTRACT
This chapter reviews the key characteristics of the credit default swap (CDS) market concisely. It identifies the key growth drivers of the future market development and discusses the potential impact of each driver on the market. The chapter highlights the three characteristics that helps better understand the situation of the CDS markets in order to provide future prediction: trading in over-the-counter markets, concentration of players, and development of CDS indices. It focuses on potential growth drivers in the two relevant dimensions, that is, regulatory change and technology innovation, which have been relevant when the global CDS market faced structural changes in the past. Global CDS markets have experienced a significant rise and fall, with the peak of the gross notional amount outstanding in late 2007. CDS is traded in over-the-counter (OTC) markets where contractual terms are determined bilaterally and the market information tends to be limited to a few large investment banks occupying oligopolistic positions as market makers or dealers.
