The Co-movement of Credit Default Swap Spreads, Stock Market Returns and Volatilities

The Co-movement of Credit Default Swap Spreads, Stock Market Returns and Volatilities

We study the co-movement of credit and equity markets in four Asia-Pacific countries at firm and index level. First, we establish realized volatility as an important determinant of credit default swap (CDS) spread levels and changes. Second, we examine lead-lag relationships between CDS spreads,...

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Bibliographic Details
Other Authors: Hội thảo quốc tế Ngân hàng và Tài chính thế giới 2015
Format: Conference or Workshop Item
Language:English
Published: Trường Đại học Kinh tế 2020
Subjects:
Credit Risk
Credit Default Swap
High-Frequency Data
Realized Volatility
Granger Causality
Volatility Spillover Effects
Online Access:http://repository.vnu.edu.vn/handle/VNU_123/97699
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Institution: Vietnam National University, Hanoi
Language: English
Description
Summary:We study the co-movement of credit and equity markets in four Asia-Pacific countries at firm and index level. First, we establish realized volatility as an important determinant of credit default swap (CDS) spread levels and changes. Second, we examine lead-lag relationships between CDS spreads, volatility, and stock returns using a vector-autoregressive model. At the firm level stock returns lead the other variables. However, at the index level volatility and CDS spreads are equally important. Third, we analyze volatility spillovers using the measures proposed by Diebold and Yilmaz (2014). The results suggest that realized volatility is the main contributor to cross-market volatility spillovers.

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