Testing for Nonlinear Dependence in the Credit Default Swap Market
Joint Authors
Moloney, Kitty
Raghavendra, Srinivas
Source
Economics Research International
Issue
Vol. 2011, Issue 2011 (31 Dec. 2011), pp.1-12, 12 p.
Publisher
Hindawi Publishing Corporation
Publication Date
2011-05-31
Country of Publication
Egypt
No. of Pages
12
Main Subjects
Abstract EN
The objective of this paper is to test for nonlinear dependence in the GARCH residuals of a number of asset classes using nonlinear dynamic tools.
The equity and bond market samples appear to be independent once GARCH has been applied, but evidence of nonlinear dependence in the CDS GARCH residuals is found.
The sensitivity of this result is analysed by changing the specifications of the GARCH model, and the robustness of the result is verified by applying additional tests of nonlinearity.
Evidence of nonlinear dependence in the GARCH residuals of CDS contracts has implications for the accurate modeling of the marginal distribution of the CDS market, for pricing of CDS contracts, for estimating risk neutral default probabilities in the bond market, as well as for bond market hedging strategies.
American Psychological Association (APA)
Moloney, Kitty& Raghavendra, Srinivas. 2011. Testing for Nonlinear Dependence in the Credit Default Swap Market. Economics Research International،Vol. 2011, no. 2011, pp.1-12.
https://search.emarefa.net/detail/BIM-492285
Modern Language Association (MLA)
Moloney, Kitty& Raghavendra, Srinivas. Testing for Nonlinear Dependence in the Credit Default Swap Market. Economics Research International No. 2011 (2011), pp.1-12.
https://search.emarefa.net/detail/BIM-492285
American Medical Association (AMA)
Moloney, Kitty& Raghavendra, Srinivas. Testing for Nonlinear Dependence in the Credit Default Swap Market. Economics Research International. 2011. Vol. 2011, no. 2011, pp.1-12.
https://search.emarefa.net/detail/BIM-492285
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references
Record ID
BIM-492285