The Relative Role of Sovereign CDS and Bond Markets in Efficiently Pricing Emerging Market Sovereign Credit Risk-Reference-Cited by-同舟云学术

The Relative Role of Sovereign CDS and Bond Markets in Efficiently Pricing Emerging Market Sovereign Credit Risk

Published:2020-07-17 Issue:3 Volume:19 Page:296-325
ISSN:0972-6527
Container-title:Journal of Emerging Market Finance
language:en
Short-container-title:Journal of Emerging Market Finance

Author:

Raja Zubair Ali¹,Procasky William J.²^ORCID,Oyotode-Adebile Renee³

Affiliation:

1. Department of Accounting and Finance, School of Business and Economics, Thompson Rivers University, BC, Canada.

2. Department of Accounting and Finance, Texas A&M University-Kingsville, Kingsville, TX, USA.

3. Melvin D. & Valorie Booth School of Business, Northwest Missouri State University, Maryville, MO, USA.

Abstract

Extant literature reports mixed findings on the relative efficiency of credit default swaps (CDS) and bond markets in pricing emerging market sovereign credit risk. Using a more comprehensive data set than analyzed earlier, we reexamine this issue and find that CDS dominate bonds in the price discovery of this risk, an advantage we attribute to the greater relative liquidity of that market. One exception is during the financial crisis, suggesting that when panic hits, sovereign markets price credit risk differently. However, even then, the CDS market has a greater impact on price discovery than the bond market, indicating greater overall efficiency. JEL Classification: G11, G12, G13, G14, G23

Publisher

SAGE Publications

Subject

Economics and Econometrics,Finance

Link

http://journals.sagepub.com/doi/pdf/10.1177/0972652720932772

Reference32 articles.

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