Political Uncertainty and Credit Risk

The Role of Event Markets in Forecasting Ukraine's Sovereign Spreads

Dados Bibliográficos

ID21393023
AutoresMary J Becker (0000-0001-8452-5709, University of Akron), Mary Becker (Department of Finance, College of Business The University of Akron Akron Ohio USA), Zachary McGurk (0000-0002-8394-7800, Department of Economics and Finance, Wehle School of Business Canisius University Buffalo New York USA, autor correspondente)
Ano2026
Volume73
Fascículo3
Data de publicação2026-07-01
Peer ReviewedSim
Open AccessSim
TipoARTICLE
PeriódicoScottish Journal of Political Economy (JOURNAL)
Identificadores do periódicoISSN: 0036-9292 • E-ISSN: 1467-9485
EditoraWiley (PUBLISHER • GB)
DOI10.1111/sjpe.70062
OpenAlexW7152981758
IdiomaEN
Citações recebidas1
Referências citadas53

This paper examines whether prediction market data can forecast sovereign credit risk during periods of geopolitical conflict. Using prices from 152 political event contracts traded on Polymarket, we construct a market‐based measure of geopolitical uncertainty and aggregate information using a neural network. We evaluate its ability to predict daily changes in Ukrainian sovereign bond spreads from September 2024 to September 2025. Models incorporating the prediction market signal outperform standard benchmarks in out‐of‐sample tests, with forecast improvements of up to 4.6% for the 5‐year spread. These results indicate that prediction markets capture geopolitical risk not reflected in traditional financial variables

Bond · Bond market · Construct (python library) · Credit risk · Event (particle physics) · Event study · Financial market · Geopolitics · Sovereign credit · Credit Risk and Financial Regulations · Global Financial Crisis and Policies · Market Dynamics and Volatility