Equity Prices , Credit Default Swaps , and Bond Spreads in Emerging

This Working Paper should not be reported as representing views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. In this paper we examine equilibrium price relationships and price discovery between CDS, bond, and equity markets for emerging market sovereign issuers. Findings suggest that CDS and bond spreads converge despite various pressures that arise in the market. However, in most countries, we do not find any equilibrium price relationship between the bond and CDS markets and the equity markets. As for price discovery, our results are mixed. This result stand in contrast to the empirical findings on the corporate issuers in the United States and Europe.