Credit rating changes for long-term foreign currency debt may act as a wake-up call with up-grades and downgrades in one country affecting other financial markets within and across national borders. Such a potential (contagious) rating effect is likely to be stronger in emerg-ing market...

This paper deals with the proposed use of sovereign credit ratings in the Basel Accord on Capital Adequacy (Basel II) and considers its potential effect on emerging markets financing. It investigates in a first attempt the consequences of the planned revisions on the two central aspects of...

This paper addresses the following questions. Is there evidence of financial contagion in the Eurozone? To what extent a country's vulnerability to contagion depends on "fundamentals" as opposed the government's "credibility"? We look at the empirical evidence on European sovereigns CDS spreads...

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...

We find that the degree and dynamics of sovereign bond market integration across 21 developed and 18 emerging countries is significantly heterogeneous. We show that better spanning can significantly enhance market integration through dissipating local risk premiums. Integration of the sovereign...

This paper analyses the dynamics of the credit default swap (CDS) market of PIIGS, France, Germany and the UK for the period of 2005–2010. The study is performed on the basis of the Datastream and DTCC data on CDS spreads and the BIS data on cross-border exposures.The analysis of the data...

In this paper we develop empirical measures for the strength of spillover effects. Modifying and extending the framework by Diebold and Yilmaz (2011), we quantify spillovers between sovereign credit markets and banks in the euro area. Spillovers are estimated recursively from a vector...

This paper presents a new dataset on the dynamics of non-performing loans (NPLs) during 88 banking crises since 1990. The data show similarities across crises during NPL build-ups but less so during NPL resolutions. We find a close relationship between NPL problems-elevated and unresolved...

We develop models for portfolio diversification in the sovereign credit default swap (CDS) markets and show that, despite literature findings that sovereign CDS spreads are affected by global factors, there is sufficient idiosyncratic risk to be diversified away. However, we identify regime...

This paper analyzes the evolution of the banking system sensitivity to cross-border contagion in 2006-2011. The study is performed on the basis of the BIS data on cross-border exposures and the Bankscope data on Tier 1 capital of 20 banking systems (Australia, Austria, Belgium, Canada, Finland,...