The chicken or the egg? A note on the dynamic interrelation between government bond spreads and credit default swaps

Delis, MD and Mylonidis, N (2011) The chicken or the egg? A note on the dynamic interrelation between government bond spreads and credit default swaps Finance Research Letters, 8 (3). pp. 163-170.

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Abstract

This note provides the first empirical assessment of the dynamic interrelation between government bond spreads and their associated credit default swaps (CDS). We use data for the Southern European countries (Greece, Italy, Portugal and Spain) that found themselves with a problematic public sector in the dawn of the recent financial distress. We find that CDS prices Granger-cause government bond spreads after the eruption of the 2007 sub-prime crisis. Feedback causality is detected during periods of financial and economic turmoil, thereby indicating that high risk aversion tends to perplex the transmission mechanism between CDS prices and government bond spreads. © 2010 Elsevier Inc.

Item Type:	Article
Divisions :	Surrey research (other units)
Authors :	Delis, MD and Mylonidis, N
Date :	1 September 2011
DOI :	10.1016/j.frl.2010.09.005
Depositing User :	Symplectic Elements
Date Deposited :	16 May 2017 15:15
Last Modified :	24 Jan 2020 14:12
URI:	http://epubs.surrey.ac.uk/id/eprint/818342

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