This paper employs the multivariate VAR model to examine the mechanic work of price\ndiscovery process between sovereign CDS market and the associated sovereign bond market\nin contexts of five European and Asian countries, including Vietnam, Korea, Portugal, Italy\nand France from the beginning of 2008 to the end of April, 2017. The study accentuates on\nthree aspects: the short-term interaction nexus between the sovereign CDS and the\nassociated-sovereign bond market, the long-term co-movement between them and the\ndiscovery of which market plays the leading role in the pricing process. The results evidence\nthe short-run and long-run relationship for the two markets. Particularly, the empirical test\nresults support for the predominant role of the sovereign CDS market in the price discovery\nprocess in the bulk of sample entities. This might suggests for the governments to use CDS\nprices as the future indicator for predicting the volatility of debt markets.
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