The impact of credit default swaps (CDS) and volatility index (VIX) on borsa istanbul indices

Increasing financial integration with globalization also increases the contagion effect between financial markets. An inherent characteristic of recent economic crises is the escalation of country risk premium and the instability in prominent economies. For this reason, derivative products and global risk indicators that protect investors against credit risk in financial markets have been developed in recent years. The aim of this study is to examine the effect of CDS premiums and VIX index on different stock market indices in Turkey. For this purpose, three different models were created with BIST-100, BIST-Mali and BIST-Sınai indices as dependent variables, respectively. The study covers the period 2011:01-2023:12. ARDL method and Bounds Test were used to determine the short-term and long-term relationships between the variables in the models. According to the empirical findings of the study, CDS premium and VIX index negatively affect the main sector indices in the long and short term. In addition, the empirical results indicate that CDS premium, which represents country risk, is a more important indicator for Borsa Istanbul investors compared to VIX index, which is a global risk indicator.