We use days with tail sovereign CDS spread changes of peripheral countries to identify the effects of shocks to the cost of borrowing of these countries on stock returns of banks from other countries. We find that tail sovereign GIIPS CDS changes have an asymmetric impact in that bank stocks...

Using variance decompositions in vector auto-regressions (VARs) we model a high-dimensional network of European CDS spreads to assess the transmission of credit risk to the non-financial corporate sector. Our findings suggest a sectoral clustering in the CDS network, where financial institutions...

Using variance decompositions in vector auto-regressions (VARs) we model a high-dimensional network of European CDS spreads to assess the transmission of credit risk to the non-financial corporate sector. Our findings suggest a sectoral clustering in the CDS network, where financial institutions...

We propose a hypothetical distress insurance premium (DIP) as a measure of the European banking systemic risk, which integrates the characteristics of bank size, default probability, and interconnectedness. Based on this measure, the systemic risk of European banks reached its height in late...

This paper designs a systemic risk measure for the European banking system as a hypothetical distress insurance premium (DIP), which integrates economically the main characteristics of systemic risk — size, default probability, and interconnectedness. We further identify the individual...