Are all Credit Default Swap Databases equal?

TL;DR

This paper compares five major CDS databases to understand their differences, revealing that deviations are systematic and that CMA leads price discovery, with notable discrepancies between stock and CDS return analyses.

Contribution

It provides a comprehensive comparison of major CDS databases and identifies systematic deviations and the leading role of CMA in price discovery.

Findings

Deviations among databases are systematic and explained by specific factors.

CMA quotes lead the price discovery process.

Discrepancies exist between stock and CDS return analyses.

Abstract

We compare the five major sources of corporate Credit Default Swap prices: GFI, Fenics, Reuters, CMA, and Markit, using the most liquid single name 5-year CDS in the iTraxx and CDX indexes from 2004 to 2010. Deviations from the common trend among prices in the different databases are not random but are explained by idiosyncratic factors, financing costs, global risk, and other trading factors. The CMA quotes lead the price discovery process. Moreover, we find that there is not a full agreement among databases in the results of the price discovery analysis between stock and CDS returns.