The Dynamics of Sovereign Credit Default Swap and Bond Markets: Empirical Evidence from the 2001-2007 Period

Aktug, Erdem; Vasconcellos, Geraldo M.; Bae, Youngsoo

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The Dynamics of Sovereign Credit Default Swap and Bond Markets: Empirical Evidence from the 2001-2007 Period

Applied Economics Letters, Volume 19, Issue 3, February 2012, pages 251-259.

18 Pages Posted: 22 Mar 2009 Last revised: 5 Oct 2014

See all articles by Erdem Aktug

Youngsoo Bae

University of Seoul

Date Written: February 14, 2012

Abstract

This paper evaluates the dynamic relationship between sovereign credit default swap (CDS) and bond markets over the period 2001 to 2007 across 30 emerging markets. Our results suggest that the bond markets play a significant role in the price discovery process, which is in contrast with the corporate studies. We also show that the CDS markets play a more dominant role in lead-lag relationships compared to earlier studies on the sovereign credit markets.

Keywords: Sovereign, Bond, Credit Default Swap, Cointegration, Price Discovery

JEL Classification: G15

Suggested Citation: Suggested Citation

Aktug, Rahmi Erdem and Vasconcellos, Geraldo M. and Bae, Youngsoo, The Dynamics of Sovereign Credit Default Swap and Bond Markets: Empirical Evidence from the 2001-2007 Period (February 14, 2012). Applied Economics Letters, Volume 19, Issue 3, February 2012, pages 251-259., Available at SSRN: https://ssrn.com/abstract=1364689