Default correlation at the sovereign level: evidence from some Latin American markets

Chen, Y.-H., Wang, K. and Tu, A. H. (2011) Default correlation at the sovereign level: evidence from some Latin American markets. Applied Economics, 43(11), pp. 1399-1411. (doi:10.1080/00036840802600467)

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Abstract

Using the eruption of Argentina debt crisis in 2001 as a natural experiment, we investigated the correlated default at the sovereign level for some Latin American countries. Daily closing market quotes for sovereign Credit Default Swaps (CDS) of Argentina, Brazil, Mexico and Venezuela were obtained from CreditTrade database. Using copula approach, we observed increased dependences among sovereign CDS markets during the crisis period. Their dependence structures were found to be asymmetric. Moreover, the degree of credit contagion was related to the creditworthiness of the country. This study also discussed the implications of these findings for policymakers.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Chen, Professor Cathy Yi-Hsuan
Authors: Chen, Y.-H., Wang, K., and Tu, A. H.
College/School:College of Social Sciences > Adam Smith Business School > Accounting and Finance
Journal Name:Applied Economics
Publisher:Taylor and Francis
ISSN:0003-6846
ISSN (Online):1466-4283
Published Online:29 September 2009

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