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Asymmetric Impact of Financial Conditions on Credit Default Swaps (CDS) in Turkey: Evidence From Nonlinear ARDL Approach

Asymmetric Impact of Financial Conditions on Credit Default Swaps (CDS) in Turkey: Evidence From Nonlinear ARDL Approach

Mehmet Levent Erdas
Copyright: © 2024 |Pages: 20
ISBN13: 9798369305225|ISBN13 Softcover: 9798369305263|EISBN13: 9798369305232
DOI: 10.4018/979-8-3693-0522-5.ch008
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MLA

Erdas, Mehmet Levent. "Asymmetric Impact of Financial Conditions on Credit Default Swaps (CDS) in Turkey: Evidence From Nonlinear ARDL Approach." The Role of Financial Inclusion for Reaching Sustainable Development Goals, edited by João Jungo, et al., IGI Global, 2024, pp. 102-121. https://doi.org/10.4018/979-8-3693-0522-5.ch008

APA

Erdas, M. L. (2024). Asymmetric Impact of Financial Conditions on Credit Default Swaps (CDS) in Turkey: Evidence From Nonlinear ARDL Approach. In J. Jungo, M. Madaleno, A. Botelho, & E. Dogan (Eds.), The Role of Financial Inclusion for Reaching Sustainable Development Goals (pp. 102-121). IGI Global. https://doi.org/10.4018/979-8-3693-0522-5.ch008

Chicago

Erdas, Mehmet Levent. "Asymmetric Impact of Financial Conditions on Credit Default Swaps (CDS) in Turkey: Evidence From Nonlinear ARDL Approach." In The Role of Financial Inclusion for Reaching Sustainable Development Goals, edited by João Jungo, et al., 102-121. Hershey, PA: IGI Global, 2024. https://doi.org/10.4018/979-8-3693-0522-5.ch008

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Abstract

Sovereign credit risk is an important consideration for investors, academics, and practitioners in the countries, and CDS spreads play a leading role to handle credit risk. The CDS premium has been mainly used as a market-based reference for sovereign credit risk. The increasing popularity of CDS spreads has brought into question whether there is a relation between CDS spreads and financial factors. To this end, the aim of this research is to explore the effect of financial factors on CDS in Turkey using the ARDL models. The results confirm that Brent and VIX volatility have an asymmetric relationship with CDS spreads in Turkey. The empirical findings suggest that a positive shock in VIX causes an increase in CDS spreads. The asymmetry in the relationships between CDS and financial factors highlights important policy implications for portfolio and risk management and financial stability.

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