scholarly journals Spillover effects of credit default risk in the euro area and the effects on the Euro: A GVAR approach

2018 ◽  
Vol 24 (1) ◽  
pp. 296-312 ◽  
Author(s):  
Timo Bettendorf
Keyword(s):  
Euro Area ◽  
Default Risk ◽  
Spillover Effects ◽  
Credit Default

Valuing Credit Default Swaps I: No Counterparty Default Risk

CFA Digest ◽  
2001 ◽  
Vol 31 (2) ◽  
pp. 91-92 ◽  
Author(s):  
Bruce D. Phelps
Keyword(s):  
Default Risk ◽  
Credit Default Swaps ◽  
Credit Default

Fiscal Sustainability, Default Risk and Euro Area Sovereign Bond Spreads

2011 ◽  
Author(s):  
Vladimir Borgy ◽  
Thomas Laubach ◽  
Jean-Stéphane Mésonnier ◽  
Jean-Paul Renne
Keyword(s):  
Euro Area ◽  
Default Risk ◽  
Fiscal Sustainability ◽  
Sovereign Bond ◽  
Bond Spreads

scholarly journals Corporate Yield Spreads: Default Risk or Liquidity? New Evidence from the Credit Default Swap Market

2005 ◽  
Vol 60 (5) ◽  
pp. 2213-2253 ◽  
Author(s):  
FRANCIS A. LONGSTAFF ◽  
SANJAY MITHAL ◽  
ERIC NEIS
Keyword(s):  
Default Risk ◽  
Credit Default Swap ◽  
Yield Spreads ◽  
Credit Default ◽  
Default Swap ◽  
New Evidence

scholarly journals The euro area's common default risk: Evidence on the Commission's impact on European fiscal affairs

2011 ◽  
Vol 12 (4) ◽  
pp. 507-528 ◽  
Author(s):  
Roman Goldbach ◽  
Christian Fahrholz
Keyword(s):  
Financial Markets ◽  
Euro Area ◽  
Risk Premium ◽  
Default Risk ◽  
Decisive Role ◽  
Fiscal Institutions ◽  
Growth Pact ◽  
Daily Data ◽  
Political Events ◽  
The Stability

Sovereign creditworthiness within the euro area hinges upon the credibility of the Stability and Growth Pact (SGP). We analyse whether political events that worsen the SGP's credibility result in a shared default risk premium for all euro members, therefore leading to a joint deterioration of creditworthiness. We especially examine the decisions and statements of the Commission and the Council of Economic and Finance Ministers. Analysing daily data through the 1999–2005 period with an ARMA-GARCH model, we find the Commission plays a decisive role in affecting investor evaluations, where its credibility-strengthening decisions decrease volatility and statements signalling a weakening of fiscal credibility spark uncertainty on financial markets. Our results stress the importance of creating credible fiscal institutions that preserve sovereign creditworthiness within the euro area.

scholarly journals The Determinants of Credit Default Swap Premia

2009 ◽  
Vol 44 (1) ◽  
pp. 109-132 ◽  
Author(s):  
Jan Ericsson ◽  
Kris Jacobs ◽  
Rodolfo Oviedo
Keyword(s):  
Default Risk ◽  
Common Factor ◽  
Explanatory Power ◽  
Empirical Work ◽  
Credit Default Swap ◽  
Principal Component ◽  
Corporate Bond ◽  
Credit Default ◽  
Default Swap ◽  
Swap Spreads

AbstractVariables that in theory determine credit spreads have limited explanatory power in existing empirical work on corporate bond data. We investigate the linear relationship between theoretical determinants of default risk and default swap spreads. We find that estimated coefficients for a minimal set of theoretical determinants of default risk are consistent with theory and are significant statistically and economically. Volatility and leverage have substantial explanatory power in univariate and multivariate regressions. A principal component analysis of residuals and spreads indicates limited evidence for a residual common factor, confirming that the theoretical variables explain a significant amount of the variation in the data.

scholarly journals Can Structural Models Price Default Risk? Evidence from Bond and Credit Derivative Markets

2015 ◽  
Vol 05 (03) ◽  
pp. 1550007 ◽  
Author(s):  
Jan Ericsson ◽  
Joel Reneby ◽  
Hao Wang
Keyword(s):  
Default Risk ◽  
Structural Models ◽  
Credit Default Swap ◽  
Corporate Bond ◽  
Credit Default ◽  
Credit Derivative ◽  
Risk Free Rate ◽  
Derivative Markets ◽  
Bond Spreads ◽  
Free Rate

Using a set of structural models, we evaluate the price of default protection for a sample of US corporations. In contrast to previous evidence from corporate bond data, credit default swap (CDS) premia are not systematically underestimated. In fact, one of our studied models has little difficulty on average in predicting their level. For robustness, we perform the same exercise for bond spreads by the same issuers on the same trading date. As expected, bond spreads relative to the treasury curve are systematically underestimated. This is not the case when the swap curve is used as a benchmark, suggesting that previously documented underestimation results may be sensitive to the choice of risk-free rate.

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