Asymmetric and nonlinear comovements of credit default swap and bond markets: evidence from an emerging market

BANK S., ABDİOĞLU Z., Kahraman E.

Revista Espanola de Financiacion y Contabilidad, vol.53, no.2, pp.232-253, 2024 (SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 53 Issue: 2
  • Publication Date: 2024
  • Doi Number: 10.1080/02102412.2023.2218182
  • Journal Name: Revista Espanola de Financiacion y Contabilidad
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus, Fuente Academica Plus, ABI/INFORM, Business Source Elite, Business Source Premier, DIALNET
  • Page Numbers: pp.232-253
  • Keywords: Credit Default Swaps, emerging markets, nonlinearity, price discovery, sovereign bonds, structural breaks
  • Karadeniz Technical University Affiliated: Yes

Abstract

This study examines the equilibrium and price discovery relationships between credit default swap (CDS) and bond markets through the symmetric and non-symmetric cointegration approaches, focusing on Turkish sovereign markets. While the findings, obtained using the threshold autoregressive (TAR) and momentum threshold autoregressive (MTAR) models, confirm the asymmetric and nonlinear cointegration relationship between CDS and bond markets described in a limited number of studies in the relevant literature, they also, in contrast to other relevant studies, reveal the importance of data frequency and structural breaks in price discovery research. In this context, the results show that the CDS market is the leader in price discovery in high-frequency data and after the first sub-period, and the bond market is the leader in price discovery in low-frequency data and before the first sub-period.