Risk contagion and diversification among sovereign CDS, stock, foreign exchange and commodity markets: Fresh evidence from G7 and BRICS countries

Zhipeng He and Shuguang Zhang

Finance Research Letters, 2024, vol. 62, issue PB

Abstract: This paper investigates tail risk contagion and diversification effects among sovereign credit default swap (SCDS), foreign exchange, stock, and commodity markets by constructing a tail event driven network. Network adjacency matrices indicate more significant cross-border risk contagion effects compared to cross-market contagion. Besides, the systemic risk decomposition results demonstrate that SCDS markets play a dominant role in the aggregate risk level, while the foreign exchange markets effectively reduce systemic risk. Moreover, tail event driven network quantile regression analysis shows that the impact of network factors at different risk levels exhibits a coexistence of symmetry and asymmetry, accompanied by market heterogeneity.

Keywords: Risk contagion; Risk diversification; Sovereign CDS; Systemic risk; Network analysis (search for similar items in EconPapers)
JEL-codes: C58 G11 G15 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:62:y:2024:i:pb:s1544612324002976

DOI: 10.1016/j.frl.2024.105267

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