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An Empirical Study of the North American Volatility Impact on Eurozone Bond Market

Andreani, Max LU and Tullberg, Johan LU (2026) NEKH03 20252
Department of Economics
Abstract (Swedish)
This study examines how financial market uncertainty in North America, measured by the CBOE Volatility Index (VIX), affects Eurozone bond markets. The purpose is to analyze the dynamic relationship between the VIX to both government and corporate bonds across different credit ratings, and to assess whether these relationships differ when the bonds are measured as yield-to-maturity (YTM) or option-adjusted-spreads (OAS). The study is based on daily frequency time-series data, spanning from 2000 to 2025. All data is obtained from the Bloomberg Terminal and the Federal Reserve Economic Data (FRED). The dataset consists of Euro-denominated government bond-indexes with short and medium-term maturities, and a variety of corporate bond-indexes... (More)
This study examines how financial market uncertainty in North America, measured by the CBOE Volatility Index (VIX), affects Eurozone bond markets. The purpose is to analyze the dynamic relationship between the VIX to both government and corporate bonds across different credit ratings, and to assess whether these relationships differ when the bonds are measured as yield-to-maturity (YTM) or option-adjusted-spreads (OAS). The study is based on daily frequency time-series data, spanning from 2000 to 2025. All data is obtained from the Bloomberg Terminal and the Federal Reserve Economic Data (FRED). The dataset consists of Euro-denominated government bond-indexes with short and medium-term maturities, and a variety of corporate bond-indexes ranging from AAA-rated to high yield investment grades.
The empirical framework implements a vector autoregressive (VAR) model, complemented with impulse response functions (IRF) and forecast error variance decomposition (FEVD). This is done to capture the dynamic transmissions of volatility shocks across bond markets.
The results indicate that changes in VIX have a variety of statistical significance across the Eurozone bond market. VIX were insignificant for explaining eurozone government bonds, suggesting Eurozone government bonds to be robust and stable against short-run volatility shocks in the North American economic sector. However, corporate bonds exhibit stronger significance, increasing with lower credit ratings, with the most pronounced effects on the Baa and High yield bond-indexes. (Less)
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author
Andreani, Max LU and Tullberg, Johan LU
supervisor
organization
course
NEKH03 20252
year
type
M2 - Bachelor Degree
subject
keywords
VIX, Option-adjusted spread, Yield-to-maturity, Bonds, Eurozone
language
English
id
9219042
date added to LUP
2026-02-04 08:25:02
date last changed
2026-02-04 08:25:02
@misc{9219042,
  abstract     = {{This study examines how financial market uncertainty in North America, measured by the CBOE Volatility Index (VIX), affects Eurozone bond markets. The purpose is to analyze the dynamic relationship between the VIX to both government and corporate bonds across different credit ratings, and to assess whether these relationships differ when the bonds are measured as yield-to-maturity (YTM) or option-adjusted-spreads (OAS). The study is based on daily frequency time-series data, spanning from 2000 to 2025. All data is obtained from the Bloomberg Terminal and the Federal Reserve Economic Data (FRED). The dataset consists of Euro-denominated government bond-indexes with short and medium-term maturities, and a variety of corporate bond-indexes ranging from AAA-rated to high yield investment grades.
The empirical framework implements a vector autoregressive (VAR) model, complemented with impulse response functions (IRF) and forecast error variance decomposition (FEVD). This is done to capture the dynamic transmissions of volatility shocks across bond markets.
The results indicate that changes in VIX have a variety of statistical significance across the Eurozone bond market. VIX were insignificant for explaining eurozone government bonds, suggesting Eurozone government bonds to be robust and stable against short-run volatility shocks in the North American economic sector. However, corporate bonds exhibit stronger significance, increasing with lower credit ratings, with the most pronounced effects on the Baa and High yield bond-indexes.}},
  author       = {{Andreani, Max and Tullberg, Johan}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{An Empirical Study of the North American Volatility Impact on Eurozone Bond Market}},
  year         = {{2026}},
}