Among the different criteria used for testing sustainability of public debt, the econometric approach determines whether a government is able to sustain its budget deficits without defaulting on its debt. In this contribution, by linking three different motives proposed respectively by Trehan...

The complex spillover effects between sectors observed during the global financial crisis and recent European crisis make clear the importance of improving our understanding of the interactions and feedback mechanisms between sovereign and banking-sector risks. To that end, this paper presents a...

In this study, we measure systemic importance of individual banks that are listed in the Istanbul Stock Exchange. Regarding the whole system as a portfolio of individual banks, we calculate the system-wide risk via contingent claims analysis. Using Shapley values, we assess the...

This article studies sovereign credit spreads using a contingent claims model and a balance sheet representation of the sovereign economy. Analytical formulae for domestic and external debt values as well as for the financial guarantee are derived in a framework where recovery rate is...

This paper empirically compares a variety of firm-value-based models of contingent claims. We formulate a general model which takes the perpetual coupon bond models of Merton (1974), Leland (1994) and Anderson, Sundaresan and Tychon (1996), as well as some immediate generalizations thereof, as...

Based on Contingent Claims Analysis, this paper develops a method to monitor systemic risk in the European banking system. Aggregated Distance-to-Default series are generated using option prices information from systemically important banks and the STOXX Europe 600 Banks Index. These indicators...

In a panel data framework applied to Portfolio Distance-to-Default series of corporate sectors in the euro area, this paper evaluates systemic and idiosyncratic determinants of default risk and examines how distress is transferred in and between the financial and corporate sectors since the...

Under the circumstances of markets volatility persistence, the global financial balances deteriorated during the post-crisis period. In the case of advanced countries, the bailout of the private banking system by public or multilateral financial intervention, instead of leading to financial...

To assess to which extent public debt positions in four CESEE economies (the Czech Republic, Hungary, Poland and Slovakia) are sustainable in the medium term, we apply a stochastic debt sustainability analysis (SDSA), building on Celasun, Debrun and Ostry (2007). In contrast to conventional debt...

Hungarian debt level has steadily increased since 2001, with the debt-to-GDP ratio reaching about 84% at end-2011. This high level combined with significant volatility of macroeconomic variable influencing potential future debt paths – GDP growth, exchange rate and interest spreads – put...