Tail event-based sovereign credit risk transmission network during COVID-19 pandemic

Abstract

This paper investigates the interconnectedness between sovereign credit risk based on the tail event and network dynamics technique. Specifically, we examine the interdependence in upper tails of sovereign credit default swap in the case of fifteen most COVID-19 affected countries. Empirical findings indicate that connectedness among SCDS spreads changed over time and is higher during the COVID19 outbreak. Russia, Brazil, and China are the most credit risk emitter and receiver during the COVID-19 pandemic.