Abstract
This study investigates the dynamic relationship between the Greek sovereign Credit Default Swap (CDS) and bond markets, using daily CDS and bond spreads from January 2006 to December 2010. We attempt to enlighten the conflicting conclusions of previous literature referring to sovereign credit market dynamics. The co-integration analysis suggests the existence of a long-run equilibrium relationship between the two markets. Concerning the short run, estimating a Vector Error Correction Model (VECM), we find that the bond market adjusts faster than the CDS market towards long run equilibrium. This result underlines the leading role of the Greek sovereign CDS market in the price discovery process.
Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
