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Sovereign CDS Instruments in Central Europe – Linkages and Interdependence

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Author Info

  • Agata Kliber

    (Poznan University of Economics)

Abstract

In the article, linkages among sovereign CDS instruments in Central Europe are investigated. Special attention is paid to the change of causality patterns during the Hungarian and Greek crises. The results of the research reveal that the expectations do play a role in determining the prices of the contracts, as well as that there exist regional causality relationships between the instruments. The strength of causality between the volatilities of Polish – Hungarian and Czech-Hungarian CDS prices weakened during the Hungarian crisis, while the volatilities of the three time series reacted rapidly and strongly to the Greek one. This suggest that the European events should play more important role in determining the dynamics of the contracts than the problems of the country of the weakest fundamentals in the region.

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File URL: http://www.dem.umk.pl/dem/archiwa/v11/08_Kliber%20A.pdf
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Bibliographic Info

Article provided by Uniwersytet Mikolaja Kopernika in its journal Dynamic Econometric Models.

Volume (Year): 11 (2011)
Issue (Month): ()
Pages: 111-128

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Handle: RePEc:cpn:umkdem:v:11:y:2011:p:111-128

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Web page: http://www.wydawnictwoumk.pl

Related research

Keywords: multivariate volatility; credit default swap; contagion; sunspot; Central Europe.;

References

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  1. Jun Yu & Renate Meyer, 2004. "Multivariate Stochastic Volatility Models: Bayesian Estimation and Model Comparison," Working Papers 23-2004, Singapore Management University, School of Economics.
  2. Hull, John & Predescu, Mirela & White, Alan, 2004. "The relationship between credit default swap spreads, bond yields, and credit rating announcements," Journal of Banking & Finance, Elsevier, vol. 28(11), pages 2789-2811, November.
  3. Todd Keister, 2006. "Expectations and Contagion in Self-fulfilling Currency Attacks," 2006 Meeting Papers 485, Society for Economic Dynamics.
  4. Jorion, Philippe & Zhang, Gaiyan, 2007. "Good and bad credit contagion: Evidence from credit default swaps," Journal of Financial Economics, Elsevier, vol. 84(3), pages 860-883, June.
  5. Cheung, Yin-Wong & Ng, Lilian K., 1996. "A causality-in-variance test and its application to financial market prices," Journal of Econometrics, Elsevier, vol. 72(1-2), pages 33-48.
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Cited by:
  1. Agata Kliber, 2013. "Influence of the Greek Crisis on the Risk Perception of European Economies," Central European Journal of Economic Modelling and Econometrics, CEJEME, vol. 5(2), pages 125-161, June.
  2. Michał Adam, 2013. "Spillovers and contagion in the sovereign CDS market," Bank i Kredyt, National Bank of Poland, Economic Institute, vol. 44(6), pages 571-604.

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