We propose a simple method for measuring systemic sovereign credit risk in the Eurozone by linking sovereign defaults to currency shocks. The framework rests on the assumption that systemic sovereign credit risk is high when sovereign defaults induce large shocks to the Euro currency market. We...

We construct a single consistent jump diffusion model with stochastic volatility which incorporates a common Eurozone shock factor to value currency, interest and sovereign debt products in European financial markets. In the model sovereign defaults can be induced either by the common Eurozone...