Analysis of the Volatility of Turkey’s CDS Spreads Using GARCH Models

Öz

Credit derivative products are financial contracts that were started to be used in the financial markets in the 1990s to minimize the credit risk and were created to reduce or eliminate credit risk exposure by providing insurance against losses arising from credit events. The main function of the credit default swap (CDS), which is one of the most used credit derivative products, is to transfer the credit risk. The aim of this study is to predict the volatility of CDS spreads using GARCH models considering symmetric and asymmetric effects with normal, student-t, GED and skewed-t distributions and comparing forecasting performances. We analyze Turkey’s daily CDS spreads for the period January 1st 2010 - October 30th 2019. The results show that the models considering the asymmetric effect and the fat-tailed distributions tend to produce better results.

Anahtar Kelimeler

• Credit Default Swap Spreads,Volatility,GARCH,Forecasting Models

Tek Değişkenli GARCH Modelleri İle Türkiye’nin CDS Primi Oynaklığının Analizi

Öz

Kredi türev ürünleri, kredi riskini minimize etmek için 1990’lı yıllarda finans piyasalarında kullanılmaya başlanmış ve kredi olaylarından kaynaklanan zararlara karşı sigorta sağlayarak, kredi riskine maruz kalmayı azaltmak veya ortadan kaldırmak için oluşturulmuş finansal sözleşmelerdir. En çok kullanılan kredi türev ürünlerinden biri olan kredi temerrüt takasının (CDS) temel işlevi kredi riskini dağıtmaktır. Bu çalışmanın amacı; CDS prim oynaklığını, normal, student-t, GED ve skewed-t dağılımları kullanarak simetrik ve asimetrik etkileri dikkate alan GARCH modelleri ile tahminlemek ve öngörü performanslarını karşılaştırmaktır. Bu amaç doğrultusunda 01 Ocak 2010 ile 30 Ekim 2019 tarihleri arasındaki günlük CDS risk primleri kullanılmıştır. Elde edilen sonuçlar asimetrik etkiyi dikkate alan modellerin ve kalın kuyruklu dağılımların daha iyi sonuçlar ortaya koyduğunu göstermektedir.

Anahtar Kelimeler

• Kredi Temerrüt Takas Primi,Oynaklık,GARCH,Öngörümleme

Kaynakça

1. Anson, M. J., Fabozzi, F. J., Choudhry, M., ve Chen, R. R. (2004). Credit Derivatives: Instruments, Applications, and Pricing. John Wiley & Sons.
2. Bollerslev, T. (1986). Generalized Autoregressive Conditional Heteroskedasticity. Journal of Econometrics. 31(1986), 307-327.
3. Bruyere, R., Copinot, R., Fery, L., Jaeck, C., ve Spitz, T. (2006). Credit Derivatives and Structured Credit: A Guide for Investors. John Wiley & Sons.
4. Chu, Y. A., Constantinou, N.ve O’Hara, J. (2010). An Analysis of the Determinants of the iTraxx CDS Spreads Using the Skewed Student’st AR-GARCH Model. University of Essex-Centre for Computational Finance and Aconomic Agents Working Paper Series, 40, 1-17.
5. Engle, R.F. (1982). Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation. Econometrica. 50(4), 987-1008.
6. Ding, Z., Granger, C.W.J. ve Engle, R.F. (1993). A Long Memory Property of Stock Market Returns and a New Model. Journal of Empirical Finance. 1(1), 83-106.
7. Ding, D. (2011). Modeling of Market Volatility with APARCH Model. U.U.D.M. Project Report. 2011:6.https://www.diva-portal.org/smash/get/diva2:417608/FULLTEXT01.pdf
8. Fama, E.F. (1965). The Behavior of Stock Market Prices. Journal of Business. 38(1), 34-105.

9. Fender, I., Hayo, B., ve Neuenkirch, M. (2012). Daily Pricing of Emerging Market Sovereign CDS Before and During the Global Financial Crisis. Journal of Banking & Finance. 36(10), 2786-2794.
10. Glosten, L.R., Jaganathan, R. ve Runkle, E. D. (1993). On the Relation between the Expected Value and the Volatility of the Nominal Excess Return on Stocks. The Journal of Finance. 48(5), 1787-1801.
11. Günay, S., ve Shi, Y. (2016). Long-Memory in Volatilities of CDS Spreads: Evidences From the Emerging Markets. Romanian Journal of Economic Forecasting. 19(1), 122-137.
12. Kliber, A. (2011). Sovereign CDS Instruments in Central Europe-Linkages and Interdependence. Dynamic Econometric Models. vol. 11, pages 111-128.
13. Mandelbrot, B. (1963). The variation of Certain Speculative Prices. Journal of Business. 36(4), 393-413.
14. Phillips, P. C., ve Perron, P. (1988). Testing for a unit root in time series regression. Biometrika. 75(2), 335-346.
15. Sabkha, S., De Peretti, C., ve Hmaied, D. (2018). Forecasting Sovereign CDS Volatility: A Comparison of Univariate GARCH-Class Models. HAL Id: hal-01769390. https://hal.archives-ouvertes.fr/hal-01701769390
16. Schöpf, W. (2010). Credit Default Swap Trading Strategies, Diplomica, Germany. https://www.diplom.de/document/227362, (27.10.2019).
17. Ural, M., ve Demireli, E. (2015). CDS Getirilerinin APGARCH Modellemesi. Ekonomik ve Sosyal Araştırmalar Dergisi. 11(2),171-182.
18. Varlık, S., ve Varlık, N. (2017). Türkiye'nin CDS Priminin Oynaklığı. Finans Politik & Ekonomik Yorumlar. 54(632), 9-17.