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Risk contagion and diversification among sovereign CDS, stock, foreign exchange and commodity markets: Fresh evidence from G7 and BRICS countries

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  • He, Zhipeng
  • Zhang, Shuguang

Abstract

This paper investigates tail risk contagion and diversification effects among sovereign credit default swap (SCDS), foreign exchange, stock, and commodity markets by constructing a tail event driven network. Network adjacency matrices indicate more significant cross-border risk contagion effects compared to cross-market contagion. Besides, the systemic risk decomposition results demonstrate that SCDS markets play a dominant role in the aggregate risk level, while the foreign exchange markets effectively reduce systemic risk. Moreover, tail event driven network quantile regression analysis shows that the impact of network factors at different risk levels exhibits a coexistence of symmetry and asymmetry, accompanied by market heterogeneity.

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  • He, Zhipeng & Zhang, Shuguang, 2024. "Risk contagion and diversification among sovereign CDS, stock, foreign exchange and commodity markets: Fresh evidence from G7 and BRICS countries," Finance Research Letters, Elsevier, vol. 62(PB).
    • Handle: RePEc:eee:finlet:v:62:y:2024:i:pb:s1544612324002976
    DOI: 10.1016/j.frl.2024.105267
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    Cited by:

    1. Marina Yu. Malkina, 2024. "Financial Contagion of the Commodity Markets from the Stock Market during Pandemic and New Sanctions Shocks," Journal of Applied Economic Research, Graduate School of Economics and Management, Ural Federal University, vol. 23(2), pages 452-475.

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    More about this item

    Keywords

    Risk contagion; Risk diversification; Sovereign CDS; Systemic risk; Network analysis;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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