arbiter
JournalsAccount

A spatial analysis of contagion in sovereign credit default swaps

Pelin Akçagün-Narin et al.

Journal of Financial Econometrics2025https://doi.org/10.1093/jjfinec/nbaf011article
AJG 3ABDC A*
Weight
0.50

Abstract

In this article, we propose a spatio-temporal model to investigate the dynamics of contagion in the credit event risks of sovereigns. More specifically, we examine how changes in the credit default swap (CDS) spreads of a sovereign are influenced by the CDS spreads of other sovereigns over time. Our model incorporates spatial, temporal, and spatio-temporal lags of CDS spreads while accounting for unobserved heterogeneity across sovereigns and time periods. We consider several candidates for the underlying contagion network matrix using cross-border domestic bank exposures, geographical distances between sovereigns, and pairwise correlations of CDS spreads. We propose an efficient Bayesian algorithm for estimation and a simple method to address nested and non-nested model selection problems. Using a quarterly dataset of fourteen sovereigns from 2009 to 2022, we find evidence of contagion in CDS spreads which was relatively stronger during the period 2009–2012.

Open via your library →

Cite this paper

https://doi.org/https://doi.org/10.1093/jjfinec/nbaf011

Or copy a formatted citation

@article{pelin2025,
  title        = {{A spatial analysis of contagion in sovereign credit default swaps}},
  author       = {Pelin Akçagün-Narin et al.},
  journal      = {Journal of Financial Econometrics},
  year         = {2025},
  doi          = {https://doi.org/https://doi.org/10.1093/jjfinec/nbaf011},
}

Paste directly into BibTeX, Zotero, or your reference manager.

Flag this paper

A spatial analysis of contagion in sovereign credit default swaps

Flags are reviewed by the Arbiter methodology team within 5 business days.

Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.