In this paper we investigate the problem of a bank, which, due to the presence of capital requirements, needs to issue credit derivatives. Because of asymmetric information in the loan and credit risk transfer markets, banks face an adverse selection problem, sharpened by the fact that credit...

How does bank capital regulation affect the design of credit derivative contracts? How does the opacity of the OTC credit derivative markets affect these contracts? In this paper we address these issues and characterize the optimal security design in several settings. We show that both the level...

In this paper we study the optimal design of credit derivative contracts when banks have private information about their ability in the loan market and are subject to capital requirements. First, we prove that when banks are subject to a maximum loss capital requirement the optimal signalling...

In this paper we study the optimal design of credit derivative contracts when banks have private information about their ability in the loan market and are subject to capital requirements. First, we prove that when banks are subject to maximum loss capital requirement the optimal signalling...

How do non-publicly observable credit derivatives affect the design contracts that buyers may offer to signal their own types? When credit derivative contracts are private, how do the different rules of capital adequacy affect these contracts? In this paper we address these issues and show that,...

How does bank capital regulation affect the design of credit derivative contracts? How does the opacity of the OTC credit derivative markets affect these contracts? In this paper we address these issues and characterize the optimal security design in several settings. We show that both the level...

This paper analyzes the sovereign risk contagion using credit default swaps (CDS) and bond premiums for the major eurozone countries. By emphasizing several econometric approaches (nonlinear regression, quantile regression and Bayesian quantile regression with heteroskedasticity) we show that...

This paper examines the dynamic relationship between credit risk and liquidity in the sovereign bond market in the context of the European Central Bank (ECB) interventions. Using a comprehensive set of liquidity measures obtained from a detailed, quote-level dataset of the largest interdealer...

We propose several econometric measures of connectedness based on principal-components analysis and Granger-causality networks, and apply them to the monthly returns of hedge funds, banks, broker/dealers, and insurance companies. We find that all four sectors have become highly interrelated over...

This paper analyzes the sovereign risk contagion using credit default swaps (CDS) and bond premiums for the major eurozone countries. By emphasizing several econometric approaches (nonlinear regression, quantile regression and Bayesian quantile regression with heteroskedasticity) we show that...