Extracting the Sovereigns’ CDS Market Hierarchy: A Correlation-filtering Approach

Publicado en

  • Physica A: Statistical Mechanics and its Applications


  • This paper employs correlation-into-distance mapping techniques and a minimal spanning tree-based correlation-filtering methodology on 36 sovereign CDS spread time-series in order to identify the sovereigns’ informational hierarchy. The resulting hierarchy (i) concurs with sovereigns’ eigenvector centrality; (ii) confirms the importance of geographical and credit rating clustering; (iii) identifies Russia, Turkey and Brazil as regional benchmarks; (iv) reveals the idiosyncratic nature of Japan and United States; (v) confirms that a small set of common factors affects the system; (vi) suggests that lower-medium grade rated sovereigns are the most influential, but also the most prone to contagion; and (vii) suggests the existence of a “Latin American common factor”.

fecha de publicación

  • 2014

Líneas de investigación

  • Clustering
  • Correlation-Filtering
  • Credit Default Swap
  • Hierarchy
  • Sovereign Risk

Página inicial

  • 407

Última página

  • 420


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