Hedging Emerging Market Stock Risk with Sovereign Credit Default Swaps

This paper tests sovereign credit default swaps (CDS) as a hedge and safe haven asset against stock index returns in a sample of 18 emerging markets from 2005-2014. GARCH dynamic conditional correlation analysis indicates that CDS are an effective hedge due to the consistent inverse relationship between CDS and the stock indexes of each country. CDS are largely a weak safe haven in times of extreme stock market volatility. However, during the 2008 U.S. financial crisis and the 2010 European debt crisis, CDS provide either a strong or weak safe haven in most countries

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Year of publication:	2016
Authors:	Ratner, Mitchell ; Chiu, Chih-Chieh (Jason)
Publisher:	[S.l.] : SSRN
Subject:	Hedging \| Kreditderivat \| Credit derivative \| Schwellenländer \| Emerging economies \| Länderrisiko \| Country risk \| Risiko \| Risk \| Welt \| World \| Derivat \| Derivative \| Öffentliche Anleihe \| Public bond

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