When a sovereign faces the risk of debt default, it attempts to expropriate the private sector. But the likelihood of a transfer from the sovereign risk to corporate default risk can be mitigated by legal institutions that provide strong property rights protection. Using a novel credit default...

When a sovereign faces the risk of debt default, it may be tempted to expropriate the private sector. This may be one reason for why international investment in private companies has to take into account the sovereign risk. But the likelihood of a transfer from the sovereign risk to corporate...

When a sovereign faces the risk of debt default, it may be tempted to expropriate the private sector. This may be one reason for why international investment in private companies has to take into account the sovereign risk. But the likelihood of a transfer from the sovereign risk to corporate...

We examine how equity-market frictions that restrict pessimistic trading, such as short-sale constraints, affect assessments of default risk. We find that these frictions decrease the usefulness of equity-market variables for identifying defaulting firms but increase their usefulness for...

We empirically assess the interlinkages between sovereign risk, measured in terms of CDS spreads, and exchange rates for a sample of emerging markets. Our period of analysis includes periods of severe stress, such as the Global Financial Crisis, the COVID-19 pandemic and the Ukrainian War. Using...

This study explores the risk premia embedded in sovereign default swaps using a term structure model. The risk premia remunerate investors for unexpected changes in the default intensity. A number of interesting results emerge from the analysis. First, the risk premia contribution to the spreads...