The Relation Between Global Risk Factors and Sovereign Credit Default Swap Spreads During The European Sovereign Debt Crisis: Evidence From 19 Countries

Öz

This paper uses sovereign credit default swap (CDS) data on 19 countries to examine how global risk factors affect both the change and the volatility of CDS spreads during the European sovereign debt crisis period. In the analysis, a set of variables identified by prior research are used in a Threshold GARCH setting. The findings indicate that, for majority of countries, both the extent of Greek sovereign debt crisis and global risk aversion have significant effect on the change of sovereign CDS spreads. Both factors are also significantly related to the volatility of sovereign CDS spreads for a number of countries.

Anahtar Kelimeler

• Sovereign Credit Default Swap,Global Risk Factors,European Sovereign Debt Crisis,Threshold GARCH(p,q) Model,VIX Index

Avrupa Borç Krizi Döneminde Global Risk Faktörleri ve Ülke Kredi Temerrüt Takası Primi İlişkisi: 19 Ülke Örneği

Öz

Bu makale 19 ülke için Avrupa borç krizi döneminde ülke kredi temerrüt takası primindeki değişimi  ve volatiliteyi etkileyen global risk faktörlerini incelemektedir. Çalışmada, literatürde kullanılmış olan global ekonomik durum, likidite, risk algısı ve Yunanistan borç krizinin etkisini temsil eden faktörleri içeren bir Eşik Değerli GARCH modeli kullanılmıştır. Analiz sonuçları, incelenen ülkelerin tamamına yakınında, Yunanistan borç krizinin seyrinin ülke kredi temerrüt takası primi ile ilişkili olduğunu göstermektedir. İncelenen ülkelerin çoğunda, global risk algısını temsil eden VIX endeksi ile ülke kredi temerrüt takası primindeki değişim arasında pozitif ilişki bulunmaktadır. Aynı faktörlerin birçok ülke için kredi temerrüt takası priminin volatilitesi ile de ilişkili olduğu gözlemlenmiştir.

Anahtar Kelimeler

• Ülke Kredi Temerrüt Takası,Global Risk Faktörleri,Avrupa Borç Krizi,Eşik Değerli GARCH(p,q) Modeli,VIX Endeksi

Kaynakça

1. Aizenman, J., Hutchison, M., ve Jinjarak, Y. (2013) What is the Risk of European Sovereign Debt Defaults? Fiscal Space CDS Spreads and Market Mispricing of Risk, Journal of International Money and Finance, 34, 37-59.
2. Amato, J. D.(2005) Risk Aversion and Risk Premia in the CDS Market, BIS Quarterly Review, 5, 55-68.
3. Bannier, C. E., Heidorn, T., ve Vogel H.D. (2014) Characteristics and Development of Corporate and Sovereign CDS, The Journal of Risk Finance, 15(5), 482-509.
4. Bellas, D., Papaioannou, M. G. ve Petrova, I. K. (2010) Determinants of Emerging Market Sovereign Bond Spreads: Fundamentals vs. Financial Stress, IMF Working Papers, WP/10/281, 1-25.
5. Collin-Dufresne, P., Goldstein, R.S. ve Martin, J.S. (2001) The Determinants of Credit Spread Changes, Journal of Finance, 56, 2177-2207.
6. Corzo, T.M., Gomez, J., ve Lazcano, L. (2012) The Co-movement of Sovereign Credit Default Swaps, Sovereign Bonds and Stock Markets in Europe, Working Paper,
7. Ericsson, J., Jacobs, K. ve Oviedo-Helfenberger, R.A. (2009) The Determinants of Credit Default Swap Premia, Journal of Financial and Quantitative Analysis, 44, 109-132.
8. Flannery, M.J., Houston, J.F. ve Partnoy, F. (2010) Credit Default Swap Spreads as Viable Substitutes for Credit Ratings, San Diego Legal Studies Paper, No. 10-031.

9. Hilscher, J. ve Nosbusch, Y. (2010) Determinants of Sovereign Risk: Macroeconomic Fundamentals and the Pricing of Sovereign Debt, Review of Finance, 14(2), 235-262.
10. Kapar, B. ve Olmo, J. (2011) The Determinants of Credit Default Swap Spreads in the Presence of Structural Breaks and Counterparty Risk, Working Papers Department of Economics, City University London, 11/02. Katsimi, M. ve Moutos, T. (2010) EMU and the Greek Crisis: The Political-Economy Perspective, European Journal of Political Economy, 26, 568-576.
11. Kliber, A. (2014) The Dynamics of Sovereign Credit Default Swaps and the Evolution of the Financial Crisis in Selected Central European Economies, Finance a uver-Czech Journal of Economics and Finance, 64(4), 330-350.
12. Liu, Y. ve Morley, B.(2012) Sovereign Credit Default Swaps and the Macroeconomy, Applied Economics Letters, 19, 129-132.
13. Liu, Y. ve Morley, B. (2013) Sovereign Credit Ratings, The Macroeconomy and Credit Default Swap Spread, Brussels Economic Review- Cahiers Economiques De Bruxelles, 56(3/4), 335-348.
14. Longstaff, F.A., Mithal, S. ve Neis, E. (2005) Corporate Yield Spreads: Default Risk or Liquidity? New Evidence from the Credit Default Swap Market, Journal of Finance, 60, 2213–2253.
15. Longstaff, F. A., Pan, J., Pedersen, L.H., ve Singleton, K. J. (2011) How Sovereign is Sovereign Credit Risk?, American Economic Journal: Macroeconomics, 3(2), 75-103.
16. Maltritz, D. (2012) Determinants of Yield Spreads in the Eurozone: A Bayesian Approach, Journal of International Money and Finance, 31, 657-672.
17. Naifar, N. (2011) What Explains Default Risk Premium During the Financial Crisis? Evidence from Japan, Journal of Economics and Business, 63, 412-430.
18. Naifar, N. (2012) Modeling the Dependence Structure Between Default Risk Premium, Equity Return Volatility and the Jump Risk: Evidence from a Financial Crisis, Economic Modelling, 29, 119-131.
19. Nelson, R.M., Belkin, P. ve Mix, D.E. (2010) Greece’s Debt Crisis: Overview, Policy Responses, and Implications, Working Paper (CRS Report for Congress).
20. Tian, S. (2010) Essays on Stock Market Liquidity and Liquidity Risk Premium, University of New Orleans Theses and Dissertations.
21. Wang, A.T. ve Yao, C. (2014) Risks of Latin America Sovereign Debts Before and After the Financial Crisis, Applied Economics, 46(14), 1665-1676.