 Seeking causality between liquidity risk and credit risk: TED-OIS spreads and CDS indexesSamet Gunay Research in International Business and Finance, 2020, vol. 52, issue C Abstract: Since the Global Financial Crisis, credit risk and its management have become one of the most appealing topics in finance literature. In this study, we investigate the interaction of credit risk and liquidity risk through the TED and the OIS spreads and various credit default swap indexes from the CDX and the iTraxx family (CDXIG, CDXHY, ITEEU, and ITEXO). The empirical analysis is conducted through the Kapetanios unit root test, the EGARCH model, the Bootstrap Toda-Yamamoto modified Wald test and the asymmetric causality analysis. The results of symmetric and asymmetric causality methods reveal that liquidity risk appears to play an important role in credit risk, and in most cases, the TED and the OIS spreads dominate the CDS indexes. It can, thus, be concluded that the TED and the OIS spreads are superior to the CDS indexes as an early warning indicator in the credit market. Keywords: Credit risk; Liquidity risk; TED spread; OIS spread; CDS indexes; CDXHY; CDXIG; ITEEU; ITEXO (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:52:y:2020:i:c:s0275531919306282 DOI: 10.1016/j.ribaf.2020.101189 Access Statistics for this article Research in International Business and Finance is currently edited by T. Lagoarde Segot More articles in Research in International Business and Finance from Elsevier |
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