Sovereign bond spreads and CDS premia in the Eurozone: A causality analysis || Diferenciales de bonos soberanos y primas de CDS en la zona euro: un análisis de causalidad

Cecilia Téllez Valle (), Margarita Martín García (), María A. Ramón-Jerónimo () and José Luis Martín Marín ()
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Cecilia Téllez Valle: Department of Financial Economics and Accounting, Pablo de Olavide University (Spain)
Margarita Martín García: Department of Financial Economics and Accounting, Pablo de Olavide University
María A. Ramón-Jerónimo: Department of Business Administration and Marketing, Pablo de Olavide University
José Luis Martín Marín: Department of Financial Economics and Accounting, Pablo de Olavide University

Revista de Métodos Cuantitativos para la Economía y la Empresa = Journal of Quantitative Methods for Economics and Business Administration, 2020, vol. 30, issue 1, 58-78

Abstract: This article presents an analysis of the possible relationship between the spreads of sovereign bonds and the premia of credit default swaps (CDS) to determine whether they are useful tools for the measurement of the sovereign risk either separately or by taking into account the joint evolution of their values. The data refer to ten countries in the Eurozone along 2008–2016. By applying the causality Granger test for these variables, after six different ways of proxy, CDS premia are found to be the cause of the risk spreads in certain cases, although a bidirectional relationship is predominant in many other cases. So the CDS market contains clear and highly useful information on the sovereign risk.

Keywords: sovereign risk; credit risk; CDS; causality. (search for similar items in EconPapers)
JEL-codes: G15 H63 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:pab:rmcpee:v:30:y:2020:i:1:p:58-78

DOI: 10.46661/revmetodoscuanteconempresa.3872

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