The place of credit default swaps in the management of credit risk

It has been determined by various studies that the credit default swap market is in relation with the major capital markets such as the stock market and bond market. However, it is understood that the traditional credit risk factors such as financial leverage, asset volatility and risk-free interest rate are important explanators for changes in credit default swaps. For that purpose, The relationship between banks credit default swap premiums and MSCI Europe Index, Euro Stoxx Volality Index, European Union borrowing interest rate variables were tried to be determined. As a result, it will be tried to prove that credit default swaps premiums can be used as other traditional credit risk descriptors. Johansen Cointegration test was applied to the data constituting our study firstly, and then it was analyzed with Vector Error Correction Model.