Relationship between cds spreads: A study on emerging countries

In terms of the actors in financial markets, risk is an extremely important concept. Credit risk is one of the main risk factors faced by all financial institutions. With the exposure of the credit risk to the market, financial solutions have been developed to provide protection against this risk. Credit derivatives are the result of these solutions. The most widely used contracts among credit derivatives are credit default swaps (CDS). CDS can be expressed in the simplest sense as an insurance against credit risk. In this study, credit default swaps, which are used to transfer credit risk management and credit risk based on credit risk, are examined in detail. In this study, it is investigated casual relationship among Turkey, Brazil, India, South Africa, Indonesia, Argentina, Russia and Chile five year CDS. Study period consist of January 2008 - December 2017. The interaction between the CDS premiums of the countries was analyzed by Granger causality analysis, impulse-response function and variance decomposition under the VAR model. According to the results of the study, significant causal relationship is found between the CDS premiums of emerging countries.