Ayşe Nur ŞAHİNLER / THE DYNAMIC RELATIONSHIP BETWEEN BANKING CDS PREMIUMS, THE VIX INDEX AND SOVEREIGN CDS PREMIUMS

Abstract

This study investigates the dynamic relationship between Türkiye’s banking sector CDS premiums, the VIX index, and sovereign CDS premiums using a time-varying Granger causality framework over the period from January 4, 2008, to April 19, 2024. The results reveal that causality from the VIX to banking sector CDS premiums is predominantly negative after 2018, indicating that increases in global volatility were associated with a relative stabilization or decline in credit risk perceptions. Conversely, causality from banking sector CDS premiums to the VIX is limited and positive during specific periods of heightened institutional risk. Regarding sovereign CDS dynamics, sovereign risk generally influenced bank-level CDS premiums in isolated periods, while the credit risk of major banks, particularly İş Bank and Akbank, had a more frequent and positive impact on sovereign risk perceptions. These findings emphasize the asymmetric and evolving nature of risk transmission between global volatility, institutional credit risk, and sovereign risk in Türkiye, underlining the importance of accounting for time-varying dynamics in financial market analyses.

Keywords

Banking Sector CDS, CDS, Time-Varying Causality, VIX.

JEL Classification

C32, F30, G15.

How to cite this article: Şahinler, A. N. (2025). The Dynamic Relationship Between Banking CDS Premiums, the VIX index and Sovereign CDS Premiums. International Journal of Insurance and Finance, 5(1), 29-44. https://doi.org/10.52898/ijif.2025.3