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An Assessment of the Relationship between CDS Spreads and Sovereign Credit Risk; Turkey Case

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  • Esra N. Kılcı

    (Trakya University)

Abstract

It is essential that sovereign credit risk is adequately evalua¬ted in the decision making process of international investors in the form of foreign direct investment and portfolio investments. CDS spreads are significantly used in measuring the sovereign credit risk and evaluating the risk appetite of foreign investors against the country. In this study, the relationship between macroeconomic and financial indicators which lead to increase in sovereign credit risk of Turkey and CDS spreads is analyzed with the help of an econometric application and tested that the variables are cointeg¬rated or not.

Suggested Citation

  • Esra N. Kılcı, 2017. "An Assessment of the Relationship between CDS Spreads and Sovereign Credit Risk; Turkey Case," Journal of Finance Letters (Maliye ve Finans Yazıları), Maliye ve Finans Yazıları Yayıncılık Ltd. Şti., vol. 32(108), pages 71-85, October.
    • Handle: RePEc:acc:malfin:v:32:y:2017:i:108:p:71-85
    DOI: https://doi.org/10.33203/mfy.357664
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    References listed on IDEAS

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    1. repec:aei:rpaper:30969 is not listed on IDEAS
    2. Pierre Collin-Dufresn & Robert S. Goldstein & J. Spencer Martin, 2001. "The Determinants of Credit Spread Changes," Journal of Finance, American Finance Association, vol. 56(6), pages 2177-2207, December.
    3. Michał Adam, 2013. "Spillovers and contagion in the sovereign CDS market," Bank i Kredyt, Narodowy Bank Polski, vol. 44(6), pages 571-604.
    4. Agata Kliber, 2011. "Sovereign CDS Instruments in Central Europe – Linkages and Interdependence," Dynamic Econometric Models, Uniwersytet Mikolaja Kopernika, vol. 11, pages 111-128.
    5. Jun Pan & Kenneth J. Singleton, 2008. "Default and Recovery Implicit in the Term Structure of Sovereign CDS Spreads," Journal of Finance, American Finance Association, vol. 63(5), pages 2345-2384, October.
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