Examination of the relationship between cCDS premiums and the Euro Stoxx 50 index: A study on selected european countries

Credit default swaps (CDS) are derivative products that play a significant role in financial markets. These financial instruments reflect countries' sovereign borrowing costs and perceived risk levels in the markets, making them critical indicators for investors' hedging strategies and market expectations. Particularly for leading economies in Europe such as France, Germany, Italy, and Spain, CDS premiums are crucial in determining these countries' economic health and risk perceptions. The aim of this study is to comprehensively examine the relationship between the CDS premiums of these economically strong European countries and the Euro Stoxx 50 index. Using monthly data from 2013 to 2023, the study applies the Toda-Yamamoto causality test and the AutoRegressive Distributed Lag (ARDL) model to analyze the relationship between the Euro Stoxx 50 index and the CDS premiums of these countries.