This paper studies the relative pricing of euro area sovereign CDS and the underlying government bonds. Our sample comprises weekly CDS and bond spreads of ten euro area countries for the period from January 2006 to June 2010. We first compare the determinants of CDS spreads and bond spreads and...

This paper studies the relative pricing of euro area sovereign CDS and the underlying government bonds. Our sample comprises weekly CDS and bond spreads of ten euro area countries for the period from January 2006 to June 2010. We first compare the determinants of CDS spreads and bond spreads and...

The market for credit default swaps (CDS) on US government debt is remarkably thin. Relative to the amount of reference debt, the market for CDS on USA is an order of magnitude smaller than the markets for CDS on other high-grade government borrowers, such as Germany and the UK. A common theory...