This study examines the volatility transmission mechanism among the developed and emerging CDS markets by employing multivariate GAR-CH modeling. As the globalization resulted with more integration of financial markets, it is important for market participants to know how the shocks and volatility are transmitted over time across the markets. It is also important to know if the volatility transmission changes during the times of financial crises. Significant transmission of shocks and volatility is found among different CDS markets. Contrary to previous studies showing one-way transmission of volatility from developed to emerging markets, interdependence detected among different markets indicates the presence of cross-market hedging.
Volatility transmission; MV GARCH; CDS markets
