Three essays on the determinants of the Turkish CDS premium

CDS, considered as an indicator of the default risk of a reference asset, a company, or a country, is a contract that protects the creditor against a possible default. Thanks to the CDS premium, investors can track the evolution of a country's risk level. In this context, the research question of the thesis is which variables determine the CDS premium and how much it is influenced by which variables. Thus, the objective of the thesis is to empirically investigate the economic, financial, political, and global determinants of the CDS premium. For this purpose, three independent studies (experiments) were conducted on the determinants of CDS spreads in the Turkish sample. In the first experiments, the relationship between economic, financial political risk and CDS premium was investigated by Bootstrap TY and time-varying causality analysis. A causal relationship was determined between these risks and the CDS premium. In the second experiment, the effect of Turkey's geopolitical risk index on the CDS premium was examined using ARDL bounds test and the symmetric and asymmetric time-varying causality tests. The ARDL bounds testing results show that there is a cointegration relationship between the CDS premium and the geopolitical risk index. According to the results of the time-varying symmetric and asymmetric causality test, that change over time, a causal relationship was observed between the CDS premium and the geopolitical risk, and the periods in which the geopolitical risk positively and negatively affected the CDS premium were determined. In the last experiment, the volatility interaction between the risk of CDS premium and the risk emerging in global markets was analyzed with the DCC-GARCH method. According to the results of this analysis, there is a time-dependent correlation relationship between CDS premium and global variable pairs. The results of three separate studies were evaluated and recommendations to policymakers were made at the end of the thesis.