We explore the impact of media content on sovereign credit risk. Our measure of media tone is extracted from the Thomson Reuters News Analytics database. As a proxy for sovereign credit risk we consider Credit Default Swap (CDS) spreads, which are decomposed into their risk premium and default...

Sovereign CDS spreads exhibit strong co-movements across countries. We use dynamic latent factor modelling to filter the global, regional and country effects on the spreads of 37 sovereigns. On average, approximately two-thirds of monthly CDS variability is accounted for by international...

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...