Investigating Türkiye’s financial nexus: A wavelet coherence analysis of sovereign CDS spreads, bond yields, stock index, and FX rates

Şükriye Tüysüz; Mert Gül

doi:10.53391/mmnsa.1455355

EN

Investigating Türkiye’s financial nexus: A wavelet coherence analysis of sovereign CDS spreads, bond yields, stock index, and FX rates

Abstract

This article investigates the intricate relationships between sovereign credit default swaps (CDS) and various Turkish financial assets, including the US Dollar to Turkish Lira exchange rate (USDTRY), the Borsa Istanbul 100 (XU100) stock index, and government bond yields. Employing a rigorous wavelet coherence analysis that captures the timefrequency domain, this study utilizes daily data from November 2008 to July 2022 period containing important financial, economic and global health crises, such as Great Recession, European Debt Crises, and COVID-19 pandemic. The wavelet coherence results uncover that the causality between variables is contingent on both the frequency domain and evolves dynamically over time, with the most significant interdependencies manifesting in the medium term. Moreover, the analysis reveals that government bond yields, and their respective volatilities positively impact CDS spread and its volatility. Similarly, the USDTRY rate leads to positive changes in the CDS spread. By contrast, the volatility of CDS spreads positively influences foreign exchange volatility and the XU100 index volatility. The CDS spread negatively affects the XU100 index. Overall, the findings elucidate the direction of causality between Turkish CDS spread and retained Turkish financial assets and then provide valuable information on the predictive power of those securities for investors, financial risk managers, and policymakers.

Keywords

Time-series models, asset pricing, Credit default swap, wavelet coherence analysis

Ethical Statement

Non-financial interests are directly or indirectly related to the work submitted for publication.

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Details

Primary Language

English

Subjects

Financial Mathematics

Journal Section

Research Article

Authors

Şükriye Tüysüz ^*
0000-0001-8391-6521
Türkiye

Mert Gül
0000-0002-6605-3274
Türkiye

Publication Date

December 30, 2024

Submission Date

March 19, 2024

Acceptance Date

October 21, 2024

Published in Issue

Year 2024 Volume: 4 Number: 4

DOI

https://doi.org/10.53391/mmnsa.1455355

IZ

https://izlik.org/JA48ZX97TD

APA

Tüysüz, Ş., & Gül, M. (2024). Investigating Türkiye’s financial nexus: A wavelet coherence analysis of sovereign CDS spreads, bond yields, stock index, and FX rates. Mathematical Modelling and Numerical Simulation With Applications, 4(4), 395-415. https://doi.org/10.53391/mmnsa.1455355

AMA

1.Tüysüz Ş, Gül M. Investigating Türkiye’s financial nexus: A wavelet coherence analysis of sovereign CDS spreads, bond yields, stock index, and FX rates. MMNSA. 2024;4(4):395-415. doi:10.53391/mmnsa.1455355

Chicago

Tüysüz, Şükriye, and Mert Gül. 2024. “Investigating Türkiye’s Financial Nexus: A Wavelet Coherence Analysis of Sovereign CDS Spreads, Bond Yields, Stock Index, and FX Rates”. Mathematical Modelling and Numerical Simulation With Applications 4 (4): 395-415. https://doi.org/10.53391/mmnsa.1455355.

EndNote

Tüysüz Ş, Gül M (December 1, 2024) Investigating Türkiye’s financial nexus: A wavelet coherence analysis of sovereign CDS spreads, bond yields, stock index, and FX rates. Mathematical Modelling and Numerical Simulation with Applications 4 4 395–415.

IEEE

[1]Ş. Tüysüz and M. Gül, “Investigating Türkiye’s financial nexus: A wavelet coherence analysis of sovereign CDS spreads, bond yields, stock index, and FX rates”, MMNSA, vol. 4, no. 4, pp. 395–415, Dec. 2024, doi: 10.53391/mmnsa.1455355.

ISNAD

Tüysüz, Şükriye - Gül, Mert. “Investigating Türkiye’s Financial Nexus: A Wavelet Coherence Analysis of Sovereign CDS Spreads, Bond Yields, Stock Index, and FX Rates”. Mathematical Modelling and Numerical Simulation with Applications 4/4 (December 1, 2024): 395-415. https://doi.org/10.53391/mmnsa.1455355.

JAMA

1.Tüysüz Ş, Gül M. Investigating Türkiye’s financial nexus: A wavelet coherence analysis of sovereign CDS spreads, bond yields, stock index, and FX rates. MMNSA. 2024;4:395–415.

MLA

Tüysüz, Şükriye, and Mert Gül. “Investigating Türkiye’s Financial Nexus: A Wavelet Coherence Analysis of Sovereign CDS Spreads, Bond Yields, Stock Index, and FX Rates”. Mathematical Modelling and Numerical Simulation With Applications, vol. 4, no. 4, Dec. 2024, pp. 395-1, doi:10.53391/mmnsa.1455355.

Vancouver

1.Şükriye Tüysüz, Mert Gül. Investigating Türkiye’s financial nexus: A wavelet coherence analysis of sovereign CDS spreads, bond yields, stock index, and FX rates. MMNSA. 2024 Dec. 1;4(4):395-41. doi:10.53391/mmnsa.1455355