Dependence structures and risk spillover in China’s credit bond market: A copula and CoVaR approach |
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| Institution: | 1. College of Economics, Shenzhen University, 3688 Nanhai Avenue, Nanshan District, Shenzhen, Guangdong, 518060, P.R. China;2. School of Management, University of Science and Technology of China, Hefei, P.R. China;3. Pearl River Delta Collaborative Innovation Center of Scientific Finance and Industry, Guangdong University of Finance and Economics, Guangzhou, China;4. Graduate School of Economics, Kobe University, 2-1, Rokkodai, Nada-Ku, Kobe 657-8501, Japan |
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| Abstract: | This study uses a dynamic copula model of dependence to investigate risk spillovers in China’s credit bond market between the bank and corporate sectors for a range of maturities from one week to 30 years. Using daily data on credit spreads for the period December 28, 2009 to June 2, 2017, the empirical results show that credit risk spillover is low and relatively stable for medium-term bonds, but higher and more variable for short- and long-term bonds. The results also show that credit risk spillover increased after 2014 with financial market reforms that involved interest rate liberalization and a loosening of government guarantees on corporate debt. |
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| Keywords: | Copula Dependence structures Risk spillover China Credit bond market G15 E44 E51 F41 G32 H63 |
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