Since the onset of the eurozone sovereign debt crisis, credit risk spreads in Europe have diverged. Despite this divergence, credit risk comoves strongly within certain country groups such as the eurozone periphery. We seek to answer what the determinants of the observed pattern of credit risk...

To explore the propagation of shocks across markets, this paper examines the dynamic connections between three distinct markets: credit default swaps (CDS), equities, and cross-currency basis swaps (CCBS) of four major individual economies: Eurozone, UK, Australia, and Japan. We use CDS spreads,...

We investigate interconnectedness and the contagion effect of default risk in Asian sovereign CDS markets since the global financial crisis. Using dynamic conditional correlation analysis, we find that there are significant co-movements in Asian sovereign CDS markets; that such co-movements tend...

In this paper we study the sovereign credit rating determinants of Visegrad Four countries in the period 1993-2012. The sovereign ratings in this study come from four major credit rating agencies namely Moody's, S&P, Fitch and R&I. Besides macroeconomic and socio-political indicators we analyse...

This paper analyzes the impact of bilateral investment treaties (BITs) on sovereign bond returns of 25 emerging markets from 1993 to 2016. Under a BIT, foreign investors can use an international arbitration scheme to enforce compensation claims against the domestic government in case of direct...

We build an enhanced structural credit risk Merton style model for a risky sovereign having both domestic and foreign debt outstanding. If earlier research was mainly focused on the fundamental values of the respective local and foreign currency bonds, here we move forward by elaborating on...

This paper examines the relationship between sovereign credit ratings and FDI flows from 31 OECD donor countries to 72 recipient (OECD and non-OECD) countries over the period of 1985-2012. There are three main findings in the paper. First, sovereign credit ratings of donor and recipient are...

Using novel measures of politics-policy uncertainty we document predictable variation in stock market returns across countries. Country characteristics and existing global and local risk factors do not account for such predictability, leading to large abnormal returns, up to 15% per annum. We...

We examine in a unified framework three recent perspectives on country risk: debt intolerance, original sin, and currency mismatches. We find statistical evidence supporting aspects of all three, though the strength of that support varies considerably across hypotheses and a number of open...