Asymmetric dynamics in Credit Default Swap (CDS) Pricing: The case of Türkiye

This study aims to examine the asymmetric effects of national and international factors influencing Türkiye's CDS premium. For this purpose, the NARDL method was employed using monthly frequency data for the period 2008:12–2024:05. In the study, Türkiye's 5-year Credit Default Swap is used as the dependent variable, while the interest rate, consumer price index, international reserves, BIST, oil price, and VIX index are selected as independent variables. Firstly, the stability degrees of the variables were determined by ADF and Lee and Strazicich (2003) unit root tests. Then, long and short-term dynamics were analyzed with the NARDL model. In the predicted NARDL model, it has been found that CDS and independent variables act together in the long term. According to the long-term results of the Wald test, it has been determined that there is an asymmetric relationship between CDS and oil price, interest rate and CPI variables in the long-term. According to the results of the short-term Wald test, it has been found that there is an asymmetric relationship between CDS, BIST and reserves. According to the results of NARDL long-term coefficients the relationship between CDS and VIX, CPI and oil price was found to be positive, while a negative relationship was found with BIST. Increases in VIX, oil price and CPI increase CDS, while decreases in these variables reduce CDS. The increase in BIST reduces CDS, while the decrease increases the CDS premium. According to the short deciency coefficients, it was found that there is a negative relationship between CDS and BIST and reserves. The results obtained from the analyses indicate that an increase in these variables reduces the CDS premium, while a decrease in them increases the CDS premium.