Economic Situation of the Country or Risk in the World Financial Market? The Dynamics of Polish Sovereign Credit Default Swap Spreads
DOI:
https://doi.org/10.12775/DEM.2013.005Keywords
sovereign Credit Default Swap, Bond spread, Stock Exchange indices, exchange rates, sunspots, volatility transmission, volatility models, principal component analysis, event analysisAbstract
In the article we examine what determines the Polish sovereign Credit Default Swap dynamics. We consider not only measures of changes of the economic situation of the country, but also the impact of the international data. We find that the dynamics of the Polish sCDSs is very vulnerable to the dynamics of exchange rates, stock indices and bond spreads. These variables allow us to explain its behavior without including variables reflecting economic situation of the country. It is shown that the impact of information inflow is also important.
References
Almeida, A., Goodhart, C., Payne, R. (1998), The Effects of Macroeconomic News on High Frequency Exchange Rate Behavior, Journal of Financial and Quantitative Analysis, 33, 383–408, DOI: http://dx.doi.org/10.2307/2331101.
Będowska-Sójka, B. (2011), The Impact of Macro News on Volatility of Stock Exchanges, Dynamic Econometric Models, 11, 99–110, DOI: http://dx.doi.org/10.12775/DEM.2011.007.
Bollerslev, T. (1986), Generalized Autoregressive Conditional Heteroskedasticity, Journal of Econometrics, 31, 307–327.
Bollerslev, T., Wooldridge, J. M. (1992), Quasi-maximumLikelihood Estimation and Inference in Dynamic Models with Time-varyingCovariances, Econometric Reviews, 11, 143–172.
Coudert, V., Gex, M. (2010), Credit Default Swap and Bond Markets: which Leads the Other?, Financial Stability Review, Banque de France, 14, 161–167.
Engle, R. (2002), Dynamic Conditional Correlation – a Simple Class of Multivariate GARCH Models, Journal of Business and Economic Statistics, 20, 339–350, DOI: http://dx.doi.org/10.2139/ssrn.236998.
Giannikos, C., Guirgis, H., Suenn, M., (2013), The 2008 Financial Crisis and the Dynamics of Price Discovery Among Stock Prices, CDS Spreads and Bond Spreads for U.S. finan-cial firms, Journal of Derivatives, 21, 27–48, DOI: http://dx.doi.org/10.3905/jod.2013.21.1.027.
Kalev, P. S., Liu, W.-M., Pham, P .K., Jarnecic, E. (2004), Public Information Arrival and Volatlity of Intraday Stock Returns, Journal of Banking and Finance, 28, 1441–1467, DOI: http://dx.doi.org/10.1016/S0378-4266(03)00126-2.
Kliber, A. (2013a), Influence of the Greek Crisis on the Risk Perception of European Econo-mies, Central European Journal of Economic Modelling and Econometrics, 5(2), 125–161.
Kliber, A. (2013b), Ocena ryzyka Polski z wykorzystaniem tradycyjnych mierników gospo-darczych oraz premii kontraktów CDS – porównanie (Risk of Poland According to Traditional Economic Risk Measures and sCDS Premia – a Comparison), under review for Studia Oeconomica Posnaniensia. (available at the author website: http://kms.ue.poznan.pl/kliber)
Kosmidou, K., Doumpos, M. Zopoundis, C. (2008), Country Risk Evaluation, Springer.
Lamoureux, C. G., Lastrapes, W. D. (1990), Heteroskedasticity in Stock Return Data: Volume Versus GARCH Effects, Journal of Finance, 45, 220–229, DOI: http://dx.doi.org/10.2307/2328817.
Laurent, S., Peters J.-P. (2002), G@RCH 2.2: An OX Package for Estimating and Forecasting Various ARCH Models, Journal of Economic Surveys, 16, 447–485, DOI: http://dx.doi.org/10.1111/1467-6419.00174.
Laurent, S., Boudt, K., Lahaye, J., Peters, J-P., Rombouts, J., Violante, F. (2010) G@RCH 6.1., www.garch.org.
Longstaff F. A., Mithal S., Neis E. (2005), Corporate Yield Spreads: Default Risk or Liquidity? New Evidence from the Credit Default Swap Market, The Journal of Finance, 60, 2213–2253, DOI: http://dx.doi.org/10.1111/j.1540-6261.2005.00797.x.
Longstaff, F. A., Pan, J., Pedersen, L. H., Singleton, K. J. (2011), How Sovereign is Sovereign Credit Risk? American Economic Journal: Macroeconomics, American Economic Association, 3(2), 75–103, DOI: http://dx.doi.org/10.1257/mac.3.2.75.
Pfaff, B. (2008a), VAR, SVAR and SVEC Models: Implementation Within R Package vars, Journal of Statistical Software, 27(4), http://www.jstatsoft.org/v27/i04/, (01.08.2010).
Pfaff, B. (2008b), Analysis of Integrated and Cointegrated Time Series with R. Second Edition, Springer, New York.
Plank, T. (2010), Do Macro-Economic Fundamentals Price Emerging Market Sovereign CDS Spreads?, Working Paper: http://finance.wharton.upenn.edu/weiss/wpapers/2010/10-5.pdf, (10.06.2013).
Downloads
Published
How to Cite
Issue
Section
License
The journal provides an Open Access to its content based on the non-exclusive licence Creative Commons (CC BY-ND 4.0).
To enable the publisher to disseminate the author's work to the fullest extent, the author must agrees to the terms and conditions of the License Agreement with Nicolaus Copernicus University.
Stats
Number of views and downloads: 373
Number of citations: 0