The Credit Default Swap market contagion during recent crises: international evidence

The Credit Default Swap market contagion during recent crises: international evidence 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 http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

The Credit Default Swap market contagion during recent crises: international evidence

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Publisher
Springer US
Copyright
Copyright © 2018 by Springer Science+Business Media, LLC, part of Springer Nature
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operations Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1007/s11156-018-0741-6
Publisher site
See Article on Publisher Site

Abstract

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

Journal

Review of Quantitative Finance and AccountingSpringer Journals

Published: Jun 5, 2018

References

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