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Oil Price Shocks and the Credit Default Swap Market

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  • Wei Dai

    (University of Calgary)

  • Apostolos Serletis

    (University of Calgary)

Abstract

We investigate the impact of supply and demand shocks in the global crude oil market on the CDX spread, in the context of a structural VAR model based on monthly data, over the period from November 2003 to October 2015. We find that the reaction of the CDX spread to changes in the real price of crude oil differs considerably depending on the sources of shocks. In the long run, crude oil supply shocks, aggregate demand shocks, and oil-specific demand shocks together account for nearly 90% of the variation of the CDX spread.

Suggested Citation

  • Wei Dai & Apostolos Serletis, 2018. "Oil Price Shocks and the Credit Default Swap Market," Open Economies Review, Springer, vol. 29(2), pages 283-293, April.
    • Handle: RePEc:kap:openec:v:29:y:2018:i:2:d:10.1007_s11079-017-9454-z
    DOI: 10.1007/s11079-017-9454-z
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    References listed on IDEAS

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    8. Cheuathonghua, Massaporn & de Boyrie, Maria E. & Pavlova, Ivelina & Wongkantarakorn, Jutamas, 2022. "Extreme risk spillovers from commodity indexes to sovereign CDS spreads of commodity dependent countries: A VAR quantile analysis," International Review of Financial Analysis, Elsevier, vol. 80(C).

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