THE DYNAMIC RELATIONSHIP BETWEEN BANKING CDS PREMIUMS, THE VIX INDEX AND SOVEREIGN CDS PREMIUMS

Özet

This study investigates the dynamic relationship between Türkiye’s banking sector CDS premiums, the VIX index, and sovereign CDS premiums using a time-varying Granger causality framework over the period from January 4, 2008, to April 19, 2024. The results reveal that causality from the VIX to banking sector CDS premiums is predominantly negative after 2018, indicating that increases in global volatility were associated with a relative stabilization or decline in credit risk perceptions. Conversely, causality from banking sector CDS premiums to the VIX is limited and positive during specific periods of heightened institutional risk. Regarding sovereign CDS dynamics, sovereign risk generally influenced bank-level CDS premiums in isolated periods, while the credit risk of major banks, particularly İş Bank and Akbank, had a more frequent and positive impact on sovereign risk perceptions. These findings emphasize the asymmetric and evolving nature of risk transmission between global volatility, institutional credit risk, and sovereign risk in Türkiye, underlining the importance of accounting for time-varying dynamics in financial market analyses.

Abstract

This study investigates the dynamic relationship between Türkiye’s banking sector CDS premiums, the VIX index, and sovereign CDS premiums using a time-varying Granger causality framework over the period from January 4, 2008, to April 19, 2024. The results reveal that causality from the VIX to banking sector CDS premiums is predominantly negative after 2018, indicating that increases in global volatility were associated with a relative stabilization or decline in credit risk perceptions. Conversely, causality from banking sector CDS premiums to the VIX is limited and positive during specific periods of heightened institutional risk. Regarding sovereign CDS dynamics, sovereign risk generally influenced bank-level CDS premiums in isolated periods, while the credit risk of major banks, particularly İş Bank and Akbank, had a more frequent and positive impact on sovereign risk perceptions. These findings emphasize the asymmetric and evolving nature of risk transmission between global volatility, institutional credit risk, and sovereign risk in Türkiye, underlining the importance of accounting for time-varying dynamics in financial market analyses.

Yazarlar

Ayşe Nur ŞAHİNLER

Anahtar Kelimeler

Banking Sector CDS, CDS, Time-Varying Causality, VIX

JEL Codes

C32, F30, G15

Yayın Bilgileri

Cilt 5, Sayı 1, 2025 · Sayfa 29-44

DOI: 10.52898/ijif.2025.3

Dosyalar