Assessing the Impact of Terrorist Attacks on Sovereign Risk Perception: Evidence from Turkey’s CDS Market
Assessing the Impact of Terrorist Attacks on Sovereign Risk Perception: Evidence from Turkey’s CDS Market
Author(s): Ecem Demirhan, Ekin Tokat, Hakkı Arda TokatSubject(s): National Economy, Political Sciences, Economic history, Financial Markets, Public Finances, Socio-Economic Research
Published by: Vysoká škola ekonomická v Praze
Keywords: event studies; CDS markets; political stability; uncertainty; terrorist attacks; GARCH model;
Summary/Abstract: This study investigates the impact of terrorism on financial markets, focusing on Turkey's sovereign Credit Default Swap (CDS) premiums from 2011 to 2017. Using an EGARCH model with dummy variables for various terrorist groups, the study analyzes immediate and short-term market reactions. Findings reveal significant volatility in CDS premiums following terrorist incidents, with responses varying depending on the perpetrator. The study enhances understanding of capital market reactions to terrorist events via CDS instruments, highlighting their role in assessing sovereign credit and country risk.
Journal: Prague Economic Papers
- Issue Year: 33/2024
- Issue No: 5
- Page Range: 645-661
- Page Count: 17
- Language: English
