We isolate the direct bank-to-sovereign distress channel within the Eurozone's sovereignbank-loop by exploiting the …-related variation. We find that the transmission of instrumented bank distress, while economically relevant, is significantly smaller … variables in previous studies. Furthermore, we show that the spillover of bank distress is significantly stronger for countries …

We use a compound option-based structural credit risk model to infer a term structure of banking crisis risk from … market data on bank stocks in daily frequency. Considering debt service payments with different maturities this term … structure assigns a separate estimator for short- and long-term default risk to each maturity. Applying the Duan (1994) maximum …