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An analysis through credit default swap, asset swap and zero-volatility spreads: Coup attempt and Bist 100 volatility

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  • Samet Gunay

Abstract

In this study, we explore the volatility structure of BIST 100 index returns through Markov Regime Switching VAR model in the domain of credit risk indicators of Turkey. Also, July 2016 coup attempt has been added to the model, to examine its impact on the volatility. According to the results, Asset Swap spread displays better performance than other two credit risk indicators in signaling. Markov Regime Switching results demonstrate that while BIST 100 return volatility is not affected by credit risk in low volatility regime, in high volatility regime, CDS, ASW and ZV spreads have a significant impact on the volatility. This effect, however, can be omitted due to its very low coefficient. Finally, it is seen that July 2016 coup attempt and following operations did not cause any increase in BIST 100 return volatility.

Suggested Citation

  • Samet Gunay, 2019. "An analysis through credit default swap, asset swap and zero-volatility spreads: Coup attempt and Bist 100 volatility," Borsa Istanbul Review, Research and Business Development Department, Borsa Istanbul, vol. 19(2), pages 158-170, June.
    • Handle: RePEc:bor:bistre:v:19:y:2019:i:2:p:158-170
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    More about this item

    Keywords

    CDS spread; Asset swap spread; Zero-volatility spread; Credit risk; Political risk;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • F59 - International Economics - - International Relations, National Security, and International Political Economy - - - Other
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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