The Co-Movement of Sovereign Credit Default Swaps and Bonds, and Stock Markets in Europe

36 Pages Posted: 6 Feb 2012 Last revised: 11 Mar 2012

See all articles by M. Teresa Corzo

M. Teresa Corzo

Universidad Pontificia Comillas

Javier Gomez-Biscarri

affiliation not provided to SSRN

Laura Lazcano

Universidad Pontificia Comillas

Date Written: February 3, 2012

Abstract

In this paper we investigate the relationship between sovereign CDSs and Bonds, and Equity markets for 13 European countries during the period 2008-2010. We confirm the leading role incorporating new information of Equity markets during 2008-2009, but we find large evidence supporting that during 2010 sovereign CDS markets took over this role and led the process. When focusing on the sovereign CDS markets of the 13 countries and the co-movement of these markets we find that during years 2007-2009 the Spanish CDSs lead the price discovery process. During year 2010, the German CDS also took an important leading role.

Keywords: sovereign credit risk, sovereign credit derivatives, price discovery, stock markets, lead-lag relationships

JEL Classification: G15, G14, G20

Suggested Citation

Corzo, M. Teresa and Gomez-Biscarri, Javier and Lazcano, Laura, The Co-Movement of Sovereign Credit Default Swaps and Bonds, and Stock Markets in Europe (February 3, 2012). Available at SSRN: https://ssrn.com/abstract=2000057 or http://dx.doi.org/10.2139/ssrn.2000057

M. Teresa Corzo (Contact Author)

Universidad Pontificia Comillas ( email )

Spain
915422800 (Phone)
91 5596569 (Fax)

Javier Gomez-Biscarri

affiliation not provided to SSRN

No Address Available

Laura Lazcano

Universidad Pontificia Comillas ( email )

United States
91 5422800 (Phone)
915596569 (Fax)

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