LONG TERM RELATIONSHIP BETWEEN CDS AND CURRENCY EXCHANGE RATES: THE TURKISH CASE

Yıl 2019, , 219 - 236, 15.06.2019

Sezer Bozkuş Kahyaoğlu

https://doi.org/10.31795/baunsobed.580572

Cited By: 1

Öz

The main
objective of this study is to analyze the long-term relationship between
exchange rate and credit default swaps (CDS) based on high frequency time
series as representative of Turkey's risk premium. In general, the long-term
relationship describes a long period of time in the literature. However,
although the time periods used in the testing of financial and economic
hypotheses have taken a long period of time, the use of new techniques is
needed due to the high frequencies. In the analysis of long-term relationships
with high-frequency time series, the transition and the continuity of the
shocks should be considered together. Therefore, in this study, partial
integration method considering these two features was used as an analysis tool.
The most important feature of the analysis is that it gives information about
the long term relationship based on these properties. This information is a
random process based on the tendency to revert to the mean in the period
covered and is the result of the applied test. Hence,
the relationship between variables, namely exchange rates and Turkey's CDS, are
analyzed by using non-linear causality tests. Thus, it is also analyzed whether
the effects such as jump and break on these variables change over time. Policy
recommendations are made for Turkey based on the empirical findings to
contribute to the relevant literature.

Anahtar Kelimeler

Risk Premium, Credit Default Swaps (CDS), Nonlinear Granger Causality Test, High Frequency Time Series

CDS İLE DÖVİZ KURLARI ARASINDAKİ UZUN DÖNEMLİ İLİŞKİ: TÜRKİYE ÖRNEĞİ

Öz

Bu çalışmanın temel amacı, Türkiye'nin risk primlerini temsil eden "kredi temerrüt takası" (CDS- credit default swap) ve döviz kurları arasındaki uzun  dönemli ilişkinin analizini yüksek frekanslı zaman  verilerine dayalı olarak analiz etmektir.  Genel  olarak  uzun dönemli ilişki literatürde uzun  bir zaman  dönemini tanımlamaktadır. Oysa günümüzde finansal ve iktisadi hipotezlerin testinde kullanılan zaman dönemleri uzun  bir dönemi almış olsalar bile, frekansların yüksek  olmasından dolayı,  yeni tekniklerin kullanımına ihtiyaç duyulmaktadır. Uzun dönemli ilişkilerin yüksek frekanslı zaman serileri ile analizinde şokların geçişgenliği ile  sürekliliği birlikte  dikkate alınmalıdır. Bundan dolayı bu  çalışmada  bu iki özelliği dikkate alan  kısmi  tümleşme yöntemi analiz aracı  olarak kullanılmıştır. Analizin en önemli özelliği  belirtilen özelliğe dayalı  uzun dönemli  ilişki hakkında bilgi  vermesidir. Bu bilgi  ele  alınan  dönemde ortalamaya  dönme eğilimine göre bir rastsal süreç olup uygulanan testin bir sonucu olmaktadır. Bu çalışmada kullanılan  yaklaşım ile  Türkiye’nin   CDS ile  döviz kurları arasındaki uzun  dönemli ilişki  yüksek frekanslı  zaman serileriyle analizi yapılmıştır.  Elde edilen ampirik bulgulara dayalı olarak Türkiye için politika önerileri sunulmuştur.

Anahtar Kelimeler

Risk Primi, Kredi Temerrüt Takası (CDS), Doğrusal Olmayan Granger Nedensellik Testi, Yüksek Frekanslı Zaman Serisi

Kaynakça

• Aldasoro, I. and Torsten Ehlers (2018). The Credit Default Swap Market: What a Difference a Decade Makes, BIS Quarterly Review, June 2018.
• Akkuş H.T., Şakir Sakarya, Osman Tüzün (2018). Tahvil Faizleri ile CDS Primleri Arasındaki Oynaklık Yayılım Etkilerinin Belirlenmesi, Bankacılar Dergisi, Sayı 104, Mart 2018, 41-55.
• Akdoğan, Kurmaş and Meltem Gülenay Chadwick; (2013). Nonlinearities in CDS-Bond Basis, Emerging Markets Finance and Trade, 49(3), pp. 6-19.
• Alexander, C. (2011). Practical Financial Econometrics, Reprinted with Corr. Edition, Vol. / Carol Alexander; Vol 2 of Market Risk Analysis, Wiley, Chichester.
• Altman Edward I. and Herbert Rijken (2011). Transparent and Unique Sovereign Default Risk Assessment, Journal of Applied Corporate Finance, vol.23, No. 3, Winter, http://people.stern.nyu.edu/ealtman/Sovereign%20Default%20Risk%20Assessment.pdf
• Apergis Nicholas (2018). Testing for Causality: A Survey of the Current Literature, The Economics and Econometrics of the Energy-Growth Nexus, Chapter 9, Elsevier, https://www.researchgate.net/profile/Md_Washim_Akram/post/How_to_test_reverse_causality2/attachment/5b78566ecfe4a7f7ca5b333c/AS%3A661029415571456%401534613102347/download/apergis2018.pdf
• Arltová Markéta and Darina Fedorov, (2016). Selection of Unit Root Test on the Basis of Length of the Time Series and Value of AR(1) Parameter, Statistika, 96 (3), 47-64.
• Augustin Patrick, Mikhail Chernov and Dongho Song (2018). Sovereign Credit Risk And Exchange Rates: Evidence From CDS Quanto Spreads. NBER Working Paper Series, WP No. 24506, https://www.nber.org/papers/w24506.pdf
• BIS (2009). Central counterparties for over-the-counter derivatives, BIS Quarterly Review, September 2009, https://www.bis.org/publ/qtrpdf/r_qt0909f.pdf
• BIS (2018). The credit default swap market: what a difference a decade makes, https://www.bis.org/publ/qtrpdf/r_qt1806b.pdf
• Baba, N., and Inada M. (2009). Price Discovery of Subordinated Credit Spreads for Japanese Mega-banks: Evidence from Bond and Credit Default Swap Markets, Journal of International Financial Markets, Institutions & Money, 19 (4), 616-632.
• Belke, Ansgar H. and Christian Gokus; (2014). Volatility Patterns of CDS, Bond and Stock Markets Before and During the Financial Crisis: Evidence From Major Financial Institutions, International Journal of Economics and Finance, 6(7), pp. 53-70.
• Bouri, Elie, Maria E. De Boyrie and Ivelina Pavlova. (2016). Volatility Transmission from Commodity Markets to Sovereign CDS Spreads in Emerging and Frontier Countries, International Review of Financial Analysis, http://dx.doi. org/10.1016/j.irfa.2016.11.001, 02.01.2017.
• Calani, M. (2013). Spillovers of the Credit Default Swap Market, Banco Central de Chile, Working Paper.
• Clegg, Matthew, Krauss Christopher, Rende Jonas (2017). partialICI: An R Package for the Analysis of Partially Co-integrated Time Series, FAU Discussion Papers in Economics, No. 05/201, https://www.econstor.eu/bitstream/10419/150014/1/880195347.pdf
• Corte Pasquale Della, Lucio Sarno, Maik Schmelingk, Christian Wagner (2015). Exchange Rates and Sovereign Risk, https://www.aeaweb.org/conference/2016/retrieve.php?pdfid=512 Corsetti, Giancarlo, Keith Kuester, Andre Meier and Gernot Muller. (2013). Sovereign Risk, Fiscal Policy, and Macroeconomic Stability, The Economic Journal, 123(566), pp. 99-132.
• Dickey, D. A., Fuller, W. A. (1979), Distribution of the Estimators for Autoregressive Time Series with a Unit Root. Journal of the American Stat. Association, 74, pp. 427–431.
• Dickey, D. A., Fuller, W. A. (1981), Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root. Econometrica, 49, pp. 1057–72.
• Dutra Tiago Mota (2015). Credit Default Swap (CDS) Prediction Model & Trading Strategy, Finance Project in the NOVA – School of Business and Economics https://run.unl.pt/bitstream/10362/15345/1/Dutra_2015.pdf
• Engle, R.F., Granger, C.W.J., (1987). Co-Integration and Error Correction: Representation, estimation, and testing, Econometrica, 55 (2), 251.
• Granger, C.W.J., (1981). Some properties of time-series data and their use in econometric model specification, Journal of Econometrics. 16, 121-130.
• Granger, C.W.J., (1983). Cointegrated variables and error-correcting models. Discussion Paper. 83-13, Department of Economics, University of California, San Diego.
• Günay, Samet and Yanlin Shi. (2016). Long-Memory in Volatilities of CDS Spreads: Evidences from the Emerging Markets, Journal for Economic Forecasting, 1, pp. 122-137.
• Gündüz, Yalin and Orcun Kaya. (2014). Impacts of the Financial Crisis on Eurozone Sovereign CDS Spreads, Journal of International Money and Finance, 49, pp. 425-442.
• Fender, Ingo, Bernd Hayo and Matthias Neuenkirch. (2012). Daily Pricing of Emerging Market Sovereign CDS Before and During the Global Financial Crisis, Journal of Banking and Finance, 36(10), pp. 2786-2794.
• Fontana, Allessandro and Martin Scheicher; (2016). An Analysis of Euro Area Sovereign CDS and Their Relation with Government Bonds, Journal of Banking & Finance, 62, pp. 126-140.
• Hull, John and Alan White, (2001). Valuing Credit Default Swaps II: Modeling Default Correlations, Journal of Derivatives 8, 3 (Spring), 12-22.
• Intercontinental Exchange ICE. (2010). Global Credit Derivatives Markets Overview: Evolution, Standardization and Clearing, https://www.theice.com/publicdocs/ice_trust/ICE_CDS_White_Paper.pdf
• Kalbaska A., and Gatkowski M., (2012). Eurozone Sovereign Contagion: Evidence from the CDS Market (2005-2010), Journal Behavior and Organization 83, 657-673. https://pdfs.semanticscholar.org/59d7/580428bb55f7eba2bc0fb702f887b29001e7.pdf?_ga=2.265510607.1391812800.1550931652-219855978.1550931652.
• Kechagioglou Ioannis (2010). Stochastic models of default intensity for derivatives and counterparty risk valuation, PhD Thesis, University of London, Imperial College of Science, Technology and Medicine, https://spiral.imperial.ac.uk/bitstream/10044/1/11790/2/Kechagioglou-I-PhD-Thesis.pdf Kim, Suk J., Leith Salem and Eliza Wu; (2015). The Role of Macroeconomic News in Sovereign CDS Markets: Domestic and Spillover News Effects From the US, the Eurozone and China, Journal of Financial Stability, 18, pp. 208-224.
• Kunt, Abdullah S. ve Oktay Taş. (2009). Kredi Temerrüt Swapları ve Türkiye'nin CDS Priminin Tahmin Edilmesine Yönelik Bir Uygulama, İTÜ Dergisi, 5(1), ss. 78-89.
• Kwiatkowski, D., Phillips, P. C. B., Schmidt, P. Shin, Y. (1992),Testing the Null Hypothesis of Stationarity Against the Alternative of a Unit Root. Journal of Econometrics, 54, pp. 159–178. DOI: 10.1016/0304-4076(92)90104-Y.
• Longstaff, F. A., Pan, J., Pedersen, L. H., Singleton, K. J., (2011). How Sovereign is Sovereign Credit Risk?, American Economic Journal: Macroeconomics, 3, 75–103. http://www.mit.edu/~junpan/AEJFINAL.pdf
• Mano, R., (2013). Exchange Rates upon Default, Working Paper, IMF.
• Meng, L., Gwilym, O and Varas, J. (2009). Volatility Transmission Among the CDS, Equity, and Bond Markets, The Journal of Fixed Income, 18 (3), 33-46.
• Merton, R.C. (1974). On the Pricing of Corporate Debt: The Risk structure of Interest Rates. Journal of Finance, Vol. 29, No. 2
• Neziri Hekran (2009). Can Credit Default Swaps predict Financial Crises?, Journal of Applied Economic Sciences, Spring, Volume IV/Issue 1(7).
• Norden, L. and Weber, M. (2004). The Co-movement of Credit Default Swap, Bond and Stock Markets: An Empirical Analysis, CFS Working Paper, No. 2004/20.
• Pan, J., Singleton, K. J., (2008). Default and Recovery Implicit in the Term Structure of Sovereign CDS Spreads, Journal of Finance, 63, 2345–2384. http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.497.1676&rep=rep1&type=pdf
• Pesaran, M. H. (2015). Time Series and Panel Data Econometrics. Oxford University Press.
• Palladini, G., Portes, R., (2011). Sovereign CDS and Bond Pricing Dynamics in the Euroarea, NBER Working Paper 17586.
• Phillips, P. C. B., Perron, P. (1988). Testing for a unit root in a time series regression. Biometrika, 1988, Vol. 75, No. 2, pp. 335–346.
• Reinhart, Carmen M., (2002). Default, currency crises, and sovereign credit ratings, World Bank Economic Review 16, 151–170.
• Sabkha, S., Peretti, C. and Hmaied, D. (2017). International Risk Spillover in Sovereign Credit Markets: Empirical Analysis, https://scholar.google.com/scholar?safe=active&um=1&ie=UTF-8&lr&cites=5481899914975431495
• Stulz M. R. (2009). Credit Default Swaps and the Credit Crisis, NBER Working Paper No. 15384.
• Tamakoshi, G. and Hamori, S. (2016). Time-varying Co-movements and Volatility Spillovers among Financial Sector CDS Indexes in the UK., Research in International Business and Finance, 36, 288-296.
• Ural, Mert and Erhan Demireli; (2015). APGARCH Modeling of CDS Returns, International Journal of Economic & Social Research, 11(2), pp. 171-182.
• Varlık S. and N. Varlık (2017). The Volatility of Turkey’s CDS Spreads, Finans Politik & Ekonomik Yorumlar, 2017 Cilt: 54 Sayı: 632, 9-17. http://www.ekonomikyorumlar.com.tr/files/articles/152820006580_1.pdf Zhang, Benjamin Y., Hao Zhou and Haibin Zhu. (2009). Explaining Credit Default Swap Spreads with the Equity Volatility and Jump Risks of Individual Firms, Review of Financial Studies, 22(12), pp. 5099-5131.
• Zoli, Edda. (2005). How Does Fiscal Policy Affect Monetary Policy in Emerging Market Countries?, Bank for International Settlements Working Paper, 174, pp. 1-45. Wilks, S. S. (1932). Certain generalizations in the analysis of variance, Biometrika 24, 471-94.