The 2008 Global financial crisis and the subsequent European sovereign debt crisis deteriorated banks funding conditions and lead to a substitution effect among bond instruments. We examine the pricing of straight, covered and securitization bonds issued by European banks in the 2000-2016...

Using a flexible threshold copula model, we investigate the pairwise tail dependence of Eurozone sovereign credit default swap spreads during the period 2008-2013 and we detect clusters of credit default swaps with high tail dependence. Our approach is also useful to inspect the evolution of the...

This paper argues that first passage time models are likely to better than affine hazard rate models in modelling stressed credit markets and confirms their superior performance in explaining the behavior of Credit Default Swap rates for the major US banking groups over the period of the...

We build a non-stationary Hawkes model of sovereign credit risk for seven European countries, and estimate it on CDS data from the run-up to the Greek default. We model a country's credit risk as partly driven by a weighted combination of risks across countries. We find Spain and Portugal are...

This study presents a core-periphery model to determine the optimal size of the European Stability Mechanism (ESM), building on Jeanne and Ranciere (2011). While the periphery is subject to a probability of losing access to external credit, the core's incentive for setting up an ESM stems...

We identify the determinants of all German banks’ sovereign debt exposures between 2005 and 2013 and test for the implications of these exposures for bank risk. Larger, more capital market affine, and less capitalised banks hold more sovereign bonds. Around 15% of all German banks never hold...

We identify the determinants of all German banks' sovereign debt exposures between 2005 and 2013 and test for the implications of these exposures for bank risk. Larger, more capital market affine, and less capitalised banks hold more sovereign bonds. Around 15% of all German banks never hold...

Euro area governments have committed to break the doom loop between banks and sovereigns. But policymakers disagree on how to treat sovereign exposures in bank regulation. Our contribution is to model endogenous sovereign portfolio reallocation by banks in response to regulatory reform....

Euro area governments have committed to break the doom loop between bank risk and sovereign risk. But policymakers have not reached consensus on whether and how to reform the regulatory treatment of banks' sovereign exposures. To inform policy discussions, this paper simulates portfolio...

Euro area governments have committed to break the doom loop between banks and sovereigns.But policymakers disagree on how to treat sovereign exposures in bank regulation. Our contributionis to model endogenous sovereign portfolio reallocation by banks in response toregulatory reform. Simulations...