The Impact of Sovereign Ratings on the CDS Premiums: An Application on BRICS Countries and Turkey

Omer Iskenderoglu and Asuman Balat

Journal of BRSA Banking and Financial Markets, 2018, vol. 12, issue 2, 47-64

Abstract: In this study, it is investigated over the period from January 1, 2013 to March 21, 2018 whether or not sovereign ratings of Moody’s, S&P and Fitch international rating agencies for Turkey and the BRICS countries have an impact on their Credit Default Swap (CDS) Premiums via the event study method, paired samples t-test, and Mann Whitney U test. As a result of the performed analysis, it is detected that the country credit ratings resulted in a significant impact on CDS premiums during the 21-day period following the change date. In addition, it is concluded that both the decline in the country’s credit rating and the rise in the country’s credit rating led to an increase in CDS premiums.

Keywords: Sovereign Credit Rating; Credit Default Swap Spreads; Event Study (search for similar items in EconPapers)
JEL-codes: G10 G14 G24 (search for similar items in EconPapers)
Date: 2018
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