We examine recovery rates of the European banking sector. To this end, we employ information embedded in credit default swaps (CDS) with different levels of seniority. To estimate implied recovery rates, we extend the model of Schlafer and Uhrig-Homburg (2014) and include absolute priority...

The recent financial crisis offered an interesting opportunity to analyze the markets'; behavior in a high-volatility framework. In this paper, we analyzed the price discovery process of the Italian banks’ Credit Default Swap (CDS) spreads through the Merton model, extended with the inclusion...