Empirical Tests on the Credit Default Swap and Stock Markets During the Global Credit Crisis

2010 ◽  
Author(s):  
Kam Fong Chan ◽  
Alastair D.E. Marsden
Keyword(s):  
Stock Markets ◽  
Credit Default Swap ◽  
Credit Crisis ◽  
Credit Default ◽  
Default Swap ◽  
Empirical Tests

The Rise of Credit Default Swaps and Its Implications on Financial Stability

2018 ◽  
pp. 336-350
Author(s):  
Fatma Sezer Dural
Keyword(s):  
Credit Risk ◽  
Exponential Growth ◽  
Financial Stability ◽  
Credit Default Swap ◽  
Credit Default Swaps ◽  
Financial Instruments ◽  
Credit Crisis ◽  
Credit Default ◽  
Default Swap ◽  
The Stability

The credit default swap market has experienced an exponential growth in recent decades. Though the fırst credit default swap contract was negotiated in the mid-1990s, the market has enjoyed a surge of popularity beginning in 2003. By the end of June 2013, the outstanding amount reached 24.3 trillion dollars. It is mostly used to transfer or to hedge credit risk. Concurrently with the global credit crisis, several shortcomings in CDS markets have appeared. One of the obvious questions is whether they affect the stability of financial markets. In this context after broader exhibition of credit default swaps market, speculative use of CDS, inception of central counterparty, and transparency of CDS market is handled. As a conclusion, it is true that the CDS market still has some weaknesses, but it is no more prone to be destabilizing than other financial instruments. This is shown in this chapter.

The Rise of Credit Default Swaps and Its Implications on Financial Stability

2015 ◽  
pp. 341-354
Author(s):  
Fatma Sezer Dural
Keyword(s):  
Credit Risk ◽  
Exponential Growth ◽  
Financial Stability ◽  
Credit Default Swap ◽  
Credit Default Swaps ◽  
Financial Instruments ◽  
Credit Crisis ◽  
Credit Default ◽  
Default Swap ◽  
The Stability

The credit default swap market has experienced an exponential growth in recent decades. Though the first credit default swap contract was negotiated in the mid-1990s, the market has enjoyed a surge of popularity beginning in 2003. By the end of June 2013, the outstanding amount reached 24.3 trillion dollars. It is mostly used to transfer or to hedge credit risk. Concurrently with the global credit crisis, several shortcomings in CDS markets have appeared. One of the obvious questions is whether they affect the stability of financial markets. In this context after broader exhibition of credit default swaps market, speculative use of CDS, inception of central counterparty, and transparency of CDS market is handled. As a conclusion, it is true that the CDS market still has some weaknesses, but it is no more prone to be destabilizing than other financial instruments. This is shown in this chapter.

scholarly journals Sovereign Credit Default Swap and Stock Markets in Central and Eastern European Countries: Are Feedback Effects at Work?

Entropy ◽  
2020 ◽  
Vol 22 (3) ◽  
pp. 338 ◽  
Author(s):  
Sorin Gabriel Anton ◽  
Anca Elena Afloarei Nucu
Keyword(s):  
Emerging Economies ◽  
Stock Markets ◽  
Sovereign Debt ◽  
Debt Crisis ◽  
Credit Default Swap ◽  
Transfer Entropy ◽  
Sovereign Debt Crisis ◽  
Sovereign Credit ◽  
Credit Default ◽  
Default Swap

The purpose of the paper is to investigate the relationship between sovereign Credit Default Swap (CDS) and stock markets in nine emerging economies from Central and Eastern Europe (CEE), using daily data over the period January 2008–April 2018. The analysis deploys a Vector Autoregressive model, focusing on the direction of Granger causality between the credit and stock markets. We find evidence of the presence of bidirectional feedback between sovereign CDS and stock markets in CEE countries. The results highlight a transfer entropy of risk from the private to public sector over the whole period and respectively, from the public to private transfer entropy of risk during the European sovereign debt crisis only in Romania and Slovenia. Another finding that deserves particular attention is that the linkage between the CDS spreads and stock markets is time-varying and subject to regime shifts, depending on global financial conditions, such as the sovereign debt crisis. By providing insights on the inter-temporal causality of the comovements of the CDS–stock markets, the paper has significant practical implications for risk management practices and regulatory policies, under different market conditions of European emerging economies.

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