Contagious Uncertainty: Implied Volatility Spillover Effects between the Credit VIX Indices and main Asset Classes in North America and Europe

16 Pages Posted: 24 Jan 2024 Last revised: 27 Mar 2024

See all articles by Stefan Albers

Stefan Albers

Faculty of Business and Economics, Dresden University of Technology

Date Written: March 20, 2024

Abstract

This study explores the dynamic transmission of implied volatility across major asset classes and between the US and European markets. By leveraging the newly introduced Credit VIX indices, our analysis reveals that uncertainty around corporate credit risk, particularly for US investment-grade entities, is one of the main drivers of shocks beside stock market volatility. Conversely, the implied volatilities regarding sovereign bonds, energy commodities, exchange rates, and precious metals usually act as receivers of shocks.

Keywords: Credit VIX, implied volatility, risk contagion, volatility spillover, TVP-VAR connectedness

JEL Classification: F3, F65, G14, G15

Suggested Citation

Albers, Stefan, Contagious Uncertainty: Implied Volatility Spillover Effects between the Credit VIX Indices and main Asset Classes in North America and Europe (March 20, 2024). Available at SSRN: https://ssrn.com/abstract=4680092 or http://dx.doi.org/10.2139/ssrn.4680092

Stefan Albers (Contact Author)

Faculty of Business and Economics, Dresden University of Technology ( email )

Münchner Platz 3
Dresden, 01187
Germany

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