How do sovereign credit default swap spreads behave under extreme oil price movements? Evidence from G7 and BRICS countries

Jun Wang; Xiaolei Sun; Jianping Li

doi:10.1016/j.frl.2019.101350

How do sovereign credit default swap spreads behave under extreme oil price movements? Evidence from G7 and BRICS countries

Jun Wang
, Xiaolei Sun^*
, Jianping Li

^*Corresponding author for this work

CAS - Institutes of Science and Development
University of Chinese Academy of Sciences

Research output: Contribution to journal › Article › peer-review

39 Scopus citations

Abstract

Based on the GARCH[sbnd]Copula-CoVaR model, this paper explores the behavior of sovereign CDS spreads under extreme oil price movements by taking G7 and BRICS countries as examples. We reveal that the upside/downside CoVaR values of sovereign CDS spreads differ significantly from VaR values among all countries. This phenomenon illustrates that extreme oil returns are vital risks for both emerging and developed markets. Moreover, the impact of extreme oil returns on oil importers differs depending on the economic stability of each country, which is reflected in the heterogeneity of the spillover intensity.

Original language	English
Article number	101350
Journal	Finance Research Letters
Volume	34
DOIs	https://doi.org/10.1016/j.frl.2019.101350
State	Published - May 2020
Externally published	Yes

Keywords

Extreme oil prices
GARCH-Copula-CoVar
Sovereign CDS spreads
Spillover effect

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10.1016/j.frl.2019.101350

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title = "How do sovereign credit default swap spreads behave under extreme oil price movements? Evidence from G7 and BRICS countries",

abstract = "Based on the GARCH[sbnd]Copula-CoVaR model, this paper explores the behavior of sovereign CDS spreads under extreme oil price movements by taking G7 and BRICS countries as examples. We reveal that the upside/downside CoVaR values of sovereign CDS spreads differ significantly from VaR values among all countries. This phenomenon illustrates that extreme oil returns are vital risks for both emerging and developed markets. Moreover, the impact of extreme oil returns on oil importers differs depending on the economic stability of each country, which is reflected in the heterogeneity of the spillover intensity.",

keywords = "Extreme oil prices, GARCH-Copula-CoVar, Sovereign CDS spreads, Spillover effect",

author = "Jun Wang and Xiaolei Sun and Jianping Li",

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year = "2020",

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AU - Wang, Jun

AU - Sun, Xiaolei

AU - Li, Jianping

PY - 2020/5

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N2 - Based on the GARCH[sbnd]Copula-CoVaR model, this paper explores the behavior of sovereign CDS spreads under extreme oil price movements by taking G7 and BRICS countries as examples. We reveal that the upside/downside CoVaR values of sovereign CDS spreads differ significantly from VaR values among all countries. This phenomenon illustrates that extreme oil returns are vital risks for both emerging and developed markets. Moreover, the impact of extreme oil returns on oil importers differs depending on the economic stability of each country, which is reflected in the heterogeneity of the spillover intensity.

AB - Based on the GARCH[sbnd]Copula-CoVaR model, this paper explores the behavior of sovereign CDS spreads under extreme oil price movements by taking G7 and BRICS countries as examples. We reveal that the upside/downside CoVaR values of sovereign CDS spreads differ significantly from VaR values among all countries. This phenomenon illustrates that extreme oil returns are vital risks for both emerging and developed markets. Moreover, the impact of extreme oil returns on oil importers differs depending on the economic stability of each country, which is reflected in the heterogeneity of the spillover intensity.

KW - Extreme oil prices

KW - GARCH-Copula-CoVar

KW - Sovereign CDS spreads

KW - Spillover effect

UR - https://www.scopus.com/pages/publications/85075471160

U2 - 10.1016/j.frl.2019.101350

DO - 10.1016/j.frl.2019.101350

M3 - 文章

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SN - 1544-6123

VL - 34

JO - Finance Research Letters

JF - Finance Research Letters

M1 - 101350

ER -

How do sovereign credit default swap spreads behave under extreme oil price movements? Evidence from G7 and BRICS countries

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Keywords

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