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Default Contagion in a Two-Tree Economy
Ericsson, Jan; Jeanneret, Alexandre; Lu, Yiliu - 2021
We propose an explanation for default contagion based on a Lucas model with two independent debt-financed trees. The transmission mechanism is that variations in the size of one tree impact the level of risk premium and the default decision for all borrowers. If a negative shock hits one tree,...
Persistent link: https://www.econbiz.de/10013229878
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The Term Structure of Risk Premia : New Evidence from the Financial Crisis
Berg, Tobias - 2010
This study calibrates the term structure of risk premia before and during the 2007/2008 financial crisis using a new calibration approach based on credit default swaps. The risk premium term structure was flat before the crisis and downward sloping during the crisis. The instantaneous risk...
Persistent link: https://www.econbiz.de/10013146561
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The Transmission of Euro Area Sovereign Risk Contagion : Evidence from Intraday CDS and Bond Markets
Ters, Kristyna - 2016
We examine the role of the CDS and bond markets during and before the recent euro area sovereign debt crisis as transmission channels for credit risk contagion between sovereign entities. We analyse an intraday dataset for GIIPS countries as well as for France and Germany. Our findings suggest...
Persistent link: https://www.econbiz.de/10012979715
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Sovereign contagion in Europe : evidence from the CDS market
Manasse, Paolo; Zavalloni, Luca - 2013
This paper addresses the following questions. Is there evidence of financial contagion in the Eurozone? To what extent … matter concerning the Euro Zone. Second, differences in vulnerability to contagion within the Eurozone are even more … remarkable: the core Eurozone members become less vulnerable to EUZ contagion, possibly due to a safe-heaven effect, while …
Persistent link: https://www.econbiz.de/10011731038
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European Sovereign CDS Premia during the Crisis – A Cointegration Analysis
Schmidt, Alexander - 2013
In this paper, I use multivariate time series models in order to analyze the evolution of European Sovereign CDS spreads during the recent crisis. I find evidence that sovereigns' credit risk premia are non-stationary but cointegrated with simple measures of the countries' indebtedness and the...
Persistent link: https://www.econbiz.de/10013078906
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Regime-dependent sovereign risk pricing during the euro crisis
Delatte, Anne-Laure; Fouquau, Julien; Portes, Richard - 2016
Previous work has documented a greater sensitivity of long-term government bond yields to fundamentals in Euro area stress countries during the euro crisis, but we know little about the driver(s) of regime-switches. Our estimates based on a panel smooth threshold regression model quantify and...
Persistent link: https://www.econbiz.de/10011974869
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Contagion between liquid and illiquid assets during the financial crisis: evidence from the US credit derivative market
Kim, Jungmu; Park, Yuen Jung - In: Journal of derivatives and quantitative studies 28 (2020) 3, pp. 107-122
This study aims to investigate the existence of contagion between liquid and illiquid assets in the credit default swap (CDS) market around the recent financial crisis. The authors perform analyses based on vector autoregression model and the dynamic conditional correlation model. The estimation...
Persistent link: https://www.econbiz.de/10012592651
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Why do investors buy sovereign default insurance?
Augustin, Patrick; Sokolovski, Valeri; Subrahmanyam, … - 2016
We provide a comprehensive analysis of the determinants of trading in the sovereign credit default swaps (CDS) market, using weekly data for single-name sovereign CDS from October 2008 to September 2015. We describe the anatomy of the sovereign CDS market, derive a law of motion for gross...
Persistent link: https://www.econbiz.de/10011541398
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Do Rare Events Explain CDX Tranche Spreads?
Seo, Sang Byung - 2020
We investigate whether a model with time-varying probability of economic disaster can explain prices of collateralized debt obligations. We focus on senior tranches of the CDX, an index of credit default swaps on investment grade firms. These assets do not incur losses until a large fraction of...
Persistent link: https://www.econbiz.de/10012855138
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Credit Risk Premia in Sovereign Credit Default Swaps
Sperna Weiland, Rob C. - 2018
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...
Persistent link: https://www.econbiz.de/10012920738