framework where financial frictions endogenously fluctuate between moderate (low risk) and severe (high risk), depending on the … state of the economy. This framework allows for efficient estimation with many state variables and improves fit with respect …

In this paper, I analyze credit risk premia embedded in sovereign CDS spreads. In particular, I consider a heretofore … largely ignored component that reflects the compensation investors demand for default event risk. I find that this default … event risk premium is most heavily priced in short maturity CDS spreads of low-rated countries. Risk premia related to …

below fair value and to what extent this discount reflects a lack of depth in the relevant markets, scarcity of risk … lower market and funding liquidity and higher investors' risk-aversion are important drivers of the increase in the spread … to systemic risk factors …

We study the nature of systemic sovereign credit risk using CDS spreads for the U.S. Treasury, individual U.S. states … systemic risk. U.S. and Euro systemic shocks are highly correlated, but there is much less systemic risk among U.S. sovereigns … than among European sovereigns. We also find that U.S. and European systemic sovereign risk is strongly related to …

We show that liquidity risk is priced in the cross section of returns on credit default swaps (CDSs). We measure CDS … CDS spreads; on average, liquidity risk accounts for 24% of CDS spreads. Consistent with recent models of intermediary … asset pricing, illiquidity and risk premia correlate negatively with proxies for the risk-bearing capacity of CDS market …

is driven primarily by idiosyncratic country risk. We analyze several local and regional channels that may explain the … trading in sovereign CDS: (a) country-specific credit risk shocks, including changes in a country's credit rating and related …

We measure credit risk premia---prices for bearing corporate default risk in excess of expected default losses …---using Markit CDS and Moody's Analytics EDF data. We find dramatic variation over time in credit risk premia, with peaks in 2002 … expected default losses, median credit risk premia fluctuate over time by more than a factor of ten. Credit risk premia comove …