Rev Quant Finan Acc https://doi.org/10.1007/s11156-018-0741-6 ORIGINAL RESEARCH The Credit Default Swap market contagion during recent crises: international evidence 1,2 1,3 2 • • Saker Sabkha Christian de Peretti Dorra Hmaied Springer Science+Business Media, LLC, part of Springer Nature 2018 Abstract This paper analyzes Credit Default Swap spread dynamics to determine whether the sovereign Credit Default Swap market is subject to contagion effects. Analysis is performed on credit spreads data from 35 worldwide countries belonging to four different economic categories over a period from 2006 until 2014, covering the subprime crisis and the European sovereign debt crisis. A novel approach is proposed to estimate the Dynamic Conditional Correlations between CDS spreads using the AR(1)-FIEGARCH(1,d,1)-DCC model. Based on our ﬁndings, we put a slant on the ﬁnancial market vulnerability, rein- forced by contagion effects during the different phases of the crises. Furthermore, analysis of each country solely shows that contagion effects are sterner during the Eurozone crisis compared to the global ﬁnancial crisis and that the level of exposure to crises differs across global markets and regions. Yet our approach provides evidences that crises spread to countries across the world regardless their economic status or geographical positions. Keywords Sovereign risk spillover
Review of Quantitative Finance and Accounting – Springer Journals
Published: Jun 5, 2018
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