What determines the price of insurance against default of advanced economies? Our laboratory to answer this question is the credit default swap (CDS) market on government debt of 18 advanced economies. The price of credit protection on these countries shows a strong degree of co-movement, has...

This paper documents the market reaction to the introduction of the European Financial Stability Facility (EFSF) in 2010 and 2011. The effect on borrowing rates is ambiguous - Greece, Ireland, Portugal, Spain, Italy and Slovenia exhibit a decrease in rates on event days, the remaining Eurozone...

We study a two-agent pure exchange equilibrium subject to both nondiversifiable diffusive and jump risks. Agents can trade in a financial market consisting of a stock market, a money market, and an insurance market for jump risk. Heterogeneity is introduced through different levels of relative...