scholarly journals Pigs or Lambs? The European Sovereign Debt Crisis and the Role of Rating Agencies

2011 ◽  
Author(s):  
Manfred Gartner ◽  
Florian Jung ◽  
Björn Griesbach
Keyword(s):  
Sovereign Debt ◽  
Debt Crisis ◽  
Sovereign Debt Crisis ◽  
Rating Agencies ◽  
European Sovereign Debt Crisis

scholarly journals Rating Agencies, Self-Fulfilling Prophecy and Multiple Equilibria? An Empirical Model of the European Sovereign Debt Crisis 2009-2011

2017 ◽  
Vol 7 (1) ◽  
pp. 199 ◽  
Author(s):  
Manfred Gartner ◽  
Bjorn Griesbach
Keyword(s):  
Interest Rates ◽  
Sovereign Debt ◽  
Multiple Equilibria ◽  
Rating Scale ◽  
Debt Crisis ◽  
Sovereign Debt Crisis ◽  
Coefficient Estimates ◽  
Macroeconomic Variables ◽  
Rating Agencies ◽  
European Sovereign Debt Crisis

We explore whether governments may have faced scenarios of self-fulfilling prophecy and multiple equilibria during Europe’s sovereign debt crisis. To this end, we estimate the effect of interest rates and other macroeconomic variables on sovereign debt ratings, and of ratings on interest rates. We detect a nonlinear effect of ratings on interest rates which is strong enough to permit multiple equilibria. The good equilibrium is stable, ratings are excellent and interest rates are low. A second unstable equilibrium marks a threshold beyond which the country slides towards an insolvency trap. Coefficient estimates suggest that countries should stay well within the A segment of the rating scale in order to remain safe from being driven towards default.

Credit Default Swaps: A Primer and Some Recent Trends

2020 ◽  
Vol 12 (1) ◽  
pp. 177-192
Author(s):  
David Lando
Keyword(s):  
Sovereign Debt ◽  
Debt Crisis ◽  
Credit Default Swap ◽  
Sovereign Debt Crisis ◽  
European Sovereign Debt Crisis ◽  
Credit Default ◽  
Recent Trends ◽  
Default Swap ◽  
Trading Volumes

The credit default swap (CDS) remains an important class of derivatives contract despite the declining activity in the single-name corporate market. I provide a quick introduction to the contracts, the pricing formula used to interpret the market premiums, the development in trading volumes, and some key insights that are important for understanding its role in markets. I then take a closer look at the CDS-bond basis and the role of trading and regulatory frictions. Finally, the European sovereign debt crisis brought back in focus the notion of a quanto spread, which I explain.

scholarly journals The Impact of the Introduction of Uniform European Collective Action Clauses on European Government Bonds as a Regulatory Result of the European Sovereign Debt Crisis

2020 ◽  
Vol 14 (1) ◽  
pp. 1
Author(s):  
Nicoletta Layher ◽  
Eyden Samunderu
Keyword(s):  
European Union ◽  
Sovereign Debt ◽  
Debt Crisis ◽  
Sovereign Debt Crisis ◽  
The European Union ◽  
Bond Yields ◽  
Member States ◽  
Sovereign Bond ◽  
European Sovereign Debt Crisis ◽  
Collective Action Clauses

This paper conducts an empirical study on the inclusion of uniform European Collective Action Clauses (CACs) in sovereign bond contracts issued from member states of the European Union, introduced as a regulatory result of the European sovereign debt crisis. The study focuses on the reaction of sovereign bond yields from European Union member states with the inclusion of the new regulation in the European Union. A two-stage least squares regression analysis is adopted in order to determine the extent of impact effects of CACs on member states sovereign bond yields. Evidence is found that CACs in the European Union are priced on financial markets and that sovereign bond yields do respond to the inclusion of uniform CACs in the European Union.

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