We investigate the characteristic of implied volatility in CDS market and its relationship with stock market within European area. The comprehensive analysis show that stock market weakly leads CDS market on daily changes but for implied volatility, the stock market leads CDS market, and VECM analysis show that only the stock market contribute to price discovery. For sub-investment grade entities, the interactivities between implied volatility of CDS market and implied volatility of stock market are stronger especially during the recent credit crunch period.