Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/79614
Authors: 
Dimpfl, Thomas
Peter, Franziska J.
Year of Publication: 
2012
Series/Report no.: 
SFB 649 Discussion Paper 2012-051
Abstract: 
We use transfer entropy to quantify information flows between financial markets and propose a suitable bootstrap procedure for statistical inference. Transfer entropy is a model-free measure designed as the Kullback-Leibler distance of transition probabilities. Our approach allows to determine, measure and test for information transfer without being restricted to linear dynamics. In our empirical application, we examine the importance of the credit default swap market relative to the corporate bond market for the pricing of credit risk. We also analyze the dynamic relation between market risk and credit risk proxied by the VIX and the iTraxx Europe, respectively. We conduct the analyses for pre-crisis, crisis and post-crisis periods.
Subjects: 
entropy
information flow
non-linear dynamics
price discovery
credit risk
CDS
JEL: 
C14
G15
Document Type: 
Working Paper

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