Risk spillovers in oil-related CDS, stock and credit markets
This paper examines risk transmission and migration among six US measures of credit and market risk during the full period 2004–2011 period and the 2009–2011 recovery subperiod, with a focus on four sectors related to the highly volatile oil price. There are more long-run equilibrium risk relationships and short-run causal relationships among the four oil-related Credit Default Swaps (CDS) indexes, the (expected equity volatility) VIX index and the (swaption expected volatility) SMOVE index for the full period than for the recovery subperiod. The auto sector CDS spread is the most error-correcting in the long run and also leads in the risk discovery process in the short run. On the other hand, the CDS spread of the highly regulated, natural monopoly utility sector does not error correct. The four oil-related CDS spread indexes are responsive to VIX in the short- and long-run, while no index is sensitive to SMOVE which, in turn, unilaterally assembles risk migration from VIX. The 2007–2008 Great Recession seems to have led to “localization” and less migration of credit and market risk in the oil-related sectors.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Marcus Miller & Paul Weller & Lei Zhang, 2002.
"Moral Hazard and the US Stock Market: Analysing the "Greenspan Put","
Royal Economic Society, vol. 112(478), pages C171-C186, March.
- Marcus H. Miller & Paul Weller & Lei Zhang, 2002. "Moral Hazard and the US Stockmarket: Analyzing the "Greenspan Put"," Working Paper Series WP02-1, Peterson Institute for International Economics.
- Marcelo Fernandes & Marcelo Cunha Medeiros & MArcelo Scharth, 2007.
"Modeling and predicting the CBOE market volatility index,"
Textos para discussão
548, Department of Economics PUC-Rio (Brazil).
- Fernandes, Marcelo & Medeiros, Marcelo C. & Scharth, Marcel, 2014. "Modeling and predicting the CBOE market volatility index," Journal of Banking & Finance, Elsevier, vol. 40(C), pages 1-10.
- Fernandes, Marcelo & Medeiros, Marcelo C. & Scharth, Marcel, 2013. "Modeling and predicting the CBOE market volatility index," Textos para discussão 342, Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
- Duffie, Darrell & Singleton, Kenneth J, 1999. "Modeling Term Structures of Defaultable Bonds," Review of Financial Studies, Society for Financial Studies, vol. 12(4), pages 687-720.
- Ericsson, Jan & Jacobs, Kris & Oviedo, Rodolfo, 2009.
"The Determinants of Credit Default Swap Premia,"
Journal of Financial and Quantitative Analysis,
Cambridge University Press, vol. 44(01), pages 109-132, February.
- Ericsson, Jan & Jacobs, Kris & Oviedo-Helfenberger, Rodolfo, 2004. "The Determinants of Credit Default Swap Premia," SIFR Research Report Series 32, Institute for Financial Research.
- Jan Ericsson & Kris Jacobs & Rodolfo A. Oviedo, 2004. "The Determinants of Credit Default Swap Premia," CIRANO Working Papers 2004s-55, CIRANO.
- William R. Emmons & Frank A. Schmid, 2004.
"Monetary policy actions and the incentive to invest,"
2004-018, Federal Reserve Bank of St. Louis.
- William R. Emmons & Frank A. Schmid, 2004. "Monetary policy actions and the incentive to invest," Supervisory Policy Analysis Working Papers 2004-03, Federal Reserve Bank of St. Louis.
- Fathi Abid & Nader Naifar, 2006. "Credit-default swap rates and equity volatility: a nonlinear relationship," Journal of Risk Finance, Emerald Group Publishing, vol. 7(4), pages 348-371, August.
- Ralf Becker & Adam Clements & Andrew McClelland, 2008.
"The Jump component of S&P 500 volatility and the VIX index,"
NCER Working Paper Series
24, National Centre for Econometric Research.
- Becker, Ralf & Clements, Adam E. & McClelland, Andrew, 2009. "The jump component of S&P 500 volatility and the VIX index," Journal of Banking & Finance, Elsevier, vol. 33(6), pages 1033-1038, June.
- Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
- Pesaran, M. H. & Shin, Y., 1997.
"Generalised Impulse Response Analysis in Linear Multivariate Models,"
Cambridge Working Papers in Economics
9710, Faculty of Economics, University of Cambridge.
- Pesaran, H. Hashem & Shin, Yongcheol, 1998. "Generalized impulse response analysis in linear multivariate models," Economics Letters, Elsevier, vol. 58(1), pages 17-29, January.
- Koop, Gary & Pesaran, M. Hashem & Potter, Simon M., 1996. "Impulse response analysis in nonlinear multivariate models," Journal of Econometrics, Elsevier, vol. 74(1), pages 119-147, September.
- Juan Ignacio Pena & Santiago Forte, 2006. "CREDIT SPREADS: THEORY AND EVIDENCE ABOUT THE INFORMATION CONTENT OF STOCKS, BONDS AND CDSs," Business Economics Working Papers wb063310, Universidad Carlos III, Departamento de Economía de la Empresa.
- Haibin Zhu, 2006. "An Empirical Comparison of Credit Spreads between the Bond Market and the Credit Default Swap Market," Journal of Financial Services Research, Springer, vol. 29(3), pages 211-235, June.
- Acharya, Viral V. & Johnson, Timothy C., 2007.
"Insider trading in credit derivatives,"
Journal of Financial Economics,
Elsevier, vol. 84(1), pages 110-141, April.
- Roberto Blanco & Simon Brennan & Ian W. Marsh, 2005. "An Empirical Analysis of the Dynamic Relation between Investment-Grade Bonds and Credit Default Swaps," Journal of Finance, American Finance Association, vol. 60(5), pages 2255-2281, October.
- Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
- Kucuk, Ugur N., 2010. "Non-default Component of Sovereign Emerging Market Yield Spreads and its Determinants: Evidence from Credit Default Swap Market," MPRA Paper 27428, University Library of Munich, Germany.
- Forte, Santiago & Peña, Juan Ignacio, 2009. "Credit spreads: An empirical analysis on the informational content of stocks, bonds, and CDS," Journal of Banking & Finance, Elsevier, vol. 33(11), pages 2013-2025, November.
When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:36:y:2013:i:c:p:526-535. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.