On the performances of Dynamic Conditional Correlation models in the Sovereign CDS market and the corresponding bond market

Saker Sabkha () and Christian de Peretti
Additional contact information
Saker Sabkha: LEGO - Laboratoire d'Economie et de Gestion de l'Ouest - UBS - Université de Bretagne Sud - UBO EPE - Université de Brest - IMT - Institut Mines-Télécom [Paris] - IBSHS - Institut Brestois des Sciences de l'Homme et de la Société - UBO EPE - Université de Brest - UBL - Université Bretagne Loire - IMT Atlantique - IMT Atlantique - IMT - Institut Mines-Télécom [Paris]

Post-Print from HAL

Abstract: The study of an efficient financial assets' modeling method is still an open hot issue especially during recent crises. Using credit risk data from 33 worldwide countries, this paper investigates the performance of 9 Dynamic Conditional Correlation models taking into account different properties of financial markets (long memory behavior, asymmetry and/or leverage effects...). This comparative study is based on the results of several multivariate diagnostic tests. Findings show that no model outperforms the others in all situations, though, the straightforward DCC-GARCH model seems to provide the most relevant estimator parameters. Yet, the innovations distributions assumption significantly impacts the statistical fit of the model. Our work is useful for financial markets' participants so as to making decision in terms of arbitrage, hedging or speculation. JEL Classification G11, G12, F02, C58

Keywords: Sovereign credit market; Time-varying correlation; Multivariate diagnostic tests; DCC-class models (search for similar items in EconPapers)
Date: 2022-01-11
New Economics Papers: this item is included in nep-ets
Note: View the original document on HAL open archive server: https://hal.science/hal-01710398v1
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Zied Ftiti; Hachmi Ben Ameur; Wael Louhichi. Financial and Economic Systems: Transformations and New Challenges, World Scientific, pp.187-212, 2022, ⟨10.1142/9781786349507_0008⟩

Downloads: (external link)
https://hal.science/hal-01710398v1/document (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01710398

DOI: 10.1142/9781786349507_0008

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().