Assessment of the Russian stock market volatility impact on credit spreads of Russian corporate bonds

Dmitry Patlasov (dmitriypatlasov@gmail.com)
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Dmitry Patlasov: Perm State University, Perm, Russian Federation

Applied Econometrics, 2024, vol. 76, 29-50

Abstract: This study evaluates the impact of stock market volatility in the Russian Federation on the size and dynamics of credit spreads for Russian corporate bonds. Credit spreads on corporate bonds represent a measure of the risk premium in the public lending market, while stock market indicates stock market instability. Analyzing the relationship between the bond market risk premium and the instability of the stock market is a pertinent task today because these processes may exhibit both direct and inverse correlations. Additionally, formulating hypotheses about whether stock market volatility positively or negatively affects credit spreads of corporate bonds, and vice versa, poses challenges. The study utilizes data on the Moscow Exchange index (MOEX), Russia’s volatility index (RVI), yields of Russian corporate bonds, and values of Russia’s zero-coupon yield curve (KBD). The research aims to identify patterns in the dynamics of the risk premium in the bond market in response to shocks in MOEX volatility. It also seeks to characterize the actions of investors and holders of Russian corporate bonds during periods of heightened volatility in the Russian stock market.

Keywords: credit spreads; volatility; corporate bonds; coupon-free yield curve; imputed volatility; EGARCH; VAR (search for similar items in EconPapers)
JEL-codes: C32 G11 G17 (search for similar items in EconPapers)
Date: 2024
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