Sovereign bond spreadsand CDS premia in the EurozoneA causality analysis

  1. Cecilia Téllez Valle 1
  2. Margarita Martín García 1
  3. María Ángeles Ramón Jerónimo 1
  4. José Luis Martín Marín 1
  1. 1 Universidad Pablo de Olavide
    info

    Universidad Pablo de Olavide

    Sevilla, España

    ROR https://ror.org/02z749649

Journal:
Revista de métodos cuantitativos para la economía y la empresa

ISSN: 1886-516X

Year of publication: 2020

Volume: 30

Pages: 58-78

Type: Article

DOI: 10.46661/REVMETODOSCUANTECONEMPRESA.3872 DIALNET GOOGLE SCHOLAR lock_openOpen access editor

More publications in: Revista de métodos cuantitativos para la economía y la empresa

Abstract

This article presents an analysis of the possible relationship between the spreads of sovereign bonds and the premia of credit default swaps (CDS) to determine whether they are useful tools for the measurement of the sovereign risk either separately or by taking into account the joint evolution of their values. The data refer to ten countries in the Eurozone along 2008–2016. By applying the causality Granger test for these variables, after six different ways of proxy, CDS premia are found to be the cause of the risk spreads in certain cases, although a bidirectional relationship is predominant in many other cases. So the CDS market contains clear and highly useful information on the sovereign risk

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