Network structures and idiosyncratic contagion in the European sovereign credit default swap market
Kung-Cheng Ho and
Lu Yang ()
International Review of Financial Analysis, 2020, vol. 72, issue C
This study combines conditional Granger causality and network analysis to examine the interconnectedness in the European sovereign credit default swap (CDS) market. We determine that the network is unstable in the short term and stable in the long term. Further, we visualize dynamic networks and confirm financial contagion in the 2012 European debt crisis. The sources of risk spillovers and the manner in which spillovers are transferred among countries are identified accordingly. Further, we conclude that interconnectedness can be a pricing factor for determining the sovereign CDS return. The results of the network analysis indicate that the European sovereign CDS market is a complex network system and can serve as a valuable reference for investors and policymakers.
Keywords: Sovereign credit default swap market; Conditional granger causality; Network analysis; Risk spillover; Idiosyncratic contagion (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:72:y:2020:i:c:s1057521920302386
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