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Investigation of Turkey Credit Default Swaps with Entropy Concept

Author

Listed:
  • Nurbanu Bursa
  • Gamze Özel Kadýlar

    (Hacettepe Üniversitesi)

Abstract

In financial markets, the use of credit default swaps as indicator of countries risk premium has become a common practice in recent times. Credit default swaps (CDS) are one of the most important financial products that can be used to calculate the probability of default of companies and countries. In this study, an econometric analysis was conducted with entropy concept for Turkey’s credit default swap spreads. The relationship between Turkey’s 5-year credit default swap spreads and BIST100 index, currency basket, overall balance of the budget and finance, the monthly rate of exports meeting imports was examined between the dates of January 2011 and October 2014. As a result of analysis, knowing the value of BIST100 index removes uncertainty largely about the CDS spreads. It is also seen from the calculated entropy correlation coefficients, BIST100 index has the highest correlation with CDS spreads and overall balance of the budget and finance has the lowest relationship.

Suggested Citation

  • Nurbanu Bursa & Gamze Özel Kadýlar, 2016. "Investigation of Turkey Credit Default Swaps with Entropy Concept," Eurasian Eononometrics, Statistics and Emprical Economics Journal, Eurasian Academy Of Sciences, vol. 3(3), pages 23-32, January.
    • Handle: RePEc:eas:econst:v:3:y:2016:i:3:p:23-32
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    File URL: http://econstat.eurasianacademy.org/dergi/../dergi//turkiye-kredi-temerrut-takasi-primlerinin-entropi-kavrami-ile-incelenmesi201601.pdf
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    References listed on IDEAS

    as
    1. Andreia Dionisio & Rui Menezes & Diana A. Mendes, 2007. "Entropy and Uncertainty Analysis in Financial Markets," Papers 0709.0668, arXiv.org.
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    More about this item

    Keywords

    Credit Default Swap; Spread; Entropy; BÝST100 index; Turkey.;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • 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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