Credit Default Swaps – characteristics and interrelations with European capital markets

Economic Processes Management: International Scientific E-Journal. 2017. № 1
Section: International aspects of economic processes management

Cite this article:
Paskaleva M. G. (2017). Credit Default Swaps – characteristics and interrelations with European capital markets, Economic Processes Management: International Scientific E-Journal, 1, Retrieved from: http://epm.fem.sumdu.edu.ua/download/2017_1/epm2017_1_6.pdf

Full-Text PDF

Authors:
Paskaleva Mariya Georgieva
PhD Student in Finance and Accounting Department,
International Business School – Botevgrad, Bulgaria

Abstract:
The recent financial crisis in Europe has an interesting development. It appeared as a bank phenomenon in the private sector, spilled in the public and turned into European debt crisis. Although, credit default swaps represent a fraction of derivatives markets, their significance and liquidity has increased significantly especially for developed countries. The main purpose of this article is to establish whether the degree of information efficiency, related to the interrelation between CDS market and developed capital markets is more significant than in the countries with undeveloped capital market. The major research methods used in this work are correlation analysis and Granger Causality Test.

Keywords:
financial crisis, credit default swaps, developed capital markets, undeveloped capital markets, emerging markets, Granger Causality Test, correlation

References
1. Simeonov, S. (2005). Financial derivatives, 430.
2. Tsenkov, Vl. (2012). Crisis Influences between Developed and Developing Capital Markets – The Case of Central and Eastern European Countries.
3. Akerlof, G., A., Shiller, R.J. Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism.
4. Coudert, Virgine, and Mathieu Gex. (2006). Can risk aversion indicators anticipate financal crises?.” Banque de France, Financial Stability Review 9.
5. Corzo, M. T, Gomez, H., Lazcano, L. (2012). The co-movement of Sovereign Credit Default Swaps, Sovereign Bonds and Stock Markets in Europe.
6. Chan-Lau, Jorge, A., and Yoon Sook, Kim. (2004). Equity Prices, Credit Default Swaps, and Bond Spreads in Emerging Markets. IMF Working Paper WP/04/27
7. Kaminsky, Graciela, and Carmen, M. Reinhart. (1996). The Twin Crises: The Causes of Banking and Balance of Payments Problems. The American economic Review 89. 473-500.
8. Kaminsky, Graciela, Saul, Lizondo, and Carmen, Reinhart, M. (1998). Leading Indicators of Currency Crises. IMF Working Paper 97/79.
9. Merton, Robert C. (1974). On the pricing of corporate debt: The risk structure of interest rates.
10. Mishkin, Frederic S., and Eugene, N. White. (2002). U.S. Stock Market Crashes and their Aftermath: Implications for Monetary Policy. NBER Working Paper 8992
11. Norden, L., Weber, M. (2004). The Comovement of Credit Default Swap, Bond and Stock Markets: An Empirircal Analysis, Center of Financial Studies, № 2004/20
12. Sachs, J., Tornell, A., and Velasco, A. (1996). Financial Crises in Emerging Markets: The Lessons from 1995. Brooking Papers on Economic activity 1.