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Not as Black as Is Painted? Influence of sCDS Market on Domestic Financial Markets Before and After the Ban on Naked sCDS Trade

Agata Kliber

A chapter in Contemporary Trends and Challenges in Finance, 2017, pp 11-23 from Springer

Abstract: Abstract In the article we analyze the impact of sovereign CDS on other financial market within a country and verify whether the impact changed after imposing the ban on trade of the non-covered sCDS in Europe (November 2012). We analyze European sCDS of both emerging as well as developed economies, who retained their own currencies, i.e. Poland, Hungary (emerging markets) and Sweden and United Kingdom (developed ones), over the period 2008–2013. We investigate the degree of influence between the sCDS and foreign exchange market, sCDS and sovereign bond, as well as sCDS and stock exchange ones. The results vary depending on the analyzed country, indicating clearly that the Central European markets are much prone to sunspots and volatility transmission than the Western ones. However, in general the results support the hypothesis that the impact of the CDS on the other financial markets diminished after November 2012.

Keywords: Financial Market; Stock Exchange; Granger Causality; Impulse Response Function; Foreign Exchange Market (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-319-54885-2_2

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DOI: 10.1007/978-3-319-54885-2_2

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