scholarly journals The Dynamic Progression of the Redenomination and Sovereign Risk in the Price Discovery Process of Italian Banks’ CDSs

2021 ◽  
pp. 1-30
Author(s):  
Francesca Cinefra ◽  
Michele Anelli ◽  
Michele Patanè ◽  
Alessio Gioia
Keyword(s):  
Financial Crisis ◽  
Sovereign Debt ◽  
Price Discovery ◽  
Debt Crisis ◽  
Sovereign Debt Crisis ◽  
Discovery Process ◽  
Sovereign Risk ◽  
Starting Point ◽  
Rolling Window ◽  
Price Discovery Process

The recent global financial crisis and the subsequent sovereign debt crisis of the Eurozone peripheral countries have generated historic levels of volatility and instability in the financial markets. In particular, during the sovereign debt crisis market operators have begun to focus on the so-called “redenomination risk”, that is the hypothesis of exit from the EMU (Euro Monetary Union) by one or more countries and the consequent redenomination of their debt in the past national currency. This type of risk constitutes a form of additional credit risk premium due to expected systemic failure of the Eurozone. The effects of the economic-financial crisis, the weak economic growth and the political instability that have characterized especially the Italian system in recent years provide the ideal starting point to analyze the evolution of the redenomination risk in the pricing process of the Italian banks’ CDSs (Credit Default Swaps). The contribution of this work is to evaluate the dynamic evolution of sovereign and redenomination risk in the price discovery process of the Italian banks’ CDS spreads (or premia) by using rolling window regressions. Results show that redenomination risk explains a great part of the variance in the CDS spreads during periods of financial distress. The sovereign risk component explains a large part of the variance for almost the entire considered period. JEL Classification: G01, G12, G14, G20. Keywords: CDS spreads, Sovereign risk, Redenomination risk, Rolling window regressions, ISDA basis.

Conclusion

2018 ◽  
Author(s):  
Nauro F. Campos ◽  
Paul De Grauwe ◽  
Yuemei Ji
Keyword(s):  
Financial Crisis ◽  
Business Cycle ◽  
Sovereign Debt ◽  
Global Financial Crisis ◽  
Debt Crisis ◽  
Structural Reform ◽  
Structural Reforms ◽  
Sovereign Debt Crisis ◽  
The Business Cycle ◽  
The Global Financial Crisis

Structural reform policies move like the business cycle. There are moments when these are implemented with great fervour and others when they are put on the back burner or even dismantled. After the global financial crisis, and in particular the sovereign debt crisis in Europe, many countries were forced by creditor countries or were self-imposed to apply deep reforms to their product markets and especially to their labour markets. Now that Europe is recovering, the pressure to implement structural reforms has abated....

On Financial Contagion Through ETFs

2020 ◽  
pp. 82-101
Author(s):  
Alexia Thomaidou ◽  
Dimitris Kenourgios
Keyword(s):  
Financial Crisis ◽  
Sovereign Debt ◽  
Global Financial Crisis ◽  
Debt Crisis ◽  
Financial Contagion ◽  
Sovereign Debt Crisis ◽  
European Sovereign Debt Crisis ◽  
The Interest Rate ◽  
The Global Financial Crisis ◽  
The Impact

This chapter investigates the impact of the Global Financial Crisis and the European Sovereign Debt Crisis in ETFs across regions and segments. In particular, two tests are taking place, with the first one to examine if there is evidence of contagion effect and the second one to test the affection of risks in each pair of ETFs. The evidence across the stable period and the two crisis periods suggests the existence of the transmission of shocks from the Global Financial ETF to regional and sectoral ETFs. However, there is evidence that some of the ETFs remain less unaffected during both crises and some of them are immune. Moreover, the authors examine the impact of several control variables, which represent various risks, to the correlation of each pair of ETFs and the results show the influence of the interest rate risk and interbank liquidity risk during the Global Financial Crisis and the European Sovereign Debt Crisis.

Does CDS Premium Most Predict Sovereign Default Risk?

2014 ◽  
Vol 22 (3) ◽  
pp. 495-530
Author(s):  
Ki Beom Binh ◽  
Seokjin Woo ◽  
Sang Min Lee
Keyword(s):  
Financial Crisis ◽  
Default Risk ◽  
Price Discovery ◽  
Sovereign Default ◽  
Spot Rate ◽  
Discovery Process ◽  
Dollar Spot ◽  
Sovereign Default Risk ◽  
Sovereign Credit Risk ◽  
Price Discovery Process

This paper empirically analyzes the price discovery process between Korean sovereign CDS premium, spread of Korean government debt, Won-Dollar currency swap rate, and Won-Dollar FX rate. With the global financial and fiscal crisis, especially in the U.S. and Euro-zone, the interests in sovereign default risk have risen. Interests in CDS, an OTC credit derivative contract based on debt issuer’s default risk, also have increased. A large number of presses have reported that CDS premium would be the best international market indicator for the default risk taken or transferred. However, internationally the CDS market liquidity has not been sufficient enough to validate its properties. Hence, based on empirics, this paper discusses whether Korean sovereign CDS premium can be considered as an appropriate indicator of sovereign credit risk in the Korean economy. Other largely accepted indices which contain the similar information about Korean economic fundamental and Korean external sovereign credit risk are also analyzed and compared: the spread of Korean government debt, Won-Dollar Currency Swap Rate, and Won-Dollar FX rate. Our findings include: (a) in the price discovery process, Won-Dollar spot rate contributes to the price discovery especially most ‘during the financial crisis period’ and the ‘entire period’ (b) Within the period ‘after the financial crisis’, CDS premium and the other indices have mutual influences on the price discovery process higher than the period ‘before the financial crisis’ (c) while Won-Dollar forward rate shows the similar result with Won-Dollar spot rate, NDF rate and CDS premium make the largest mutual influence on price discovery in the period ‘before the financial crisis.’

scholarly journals The Double Democratic Deficit

2020 ◽  
pp. 75-109
Author(s):  
Bettina De Souza Guilherme
Keyword(s):  
Financial Crisis ◽  
Sovereign Debt ◽  
Debt Crisis ◽  
Maastricht Treaty ◽  
Democratic Deficit ◽  
Paradigm Change ◽  
Democratic Accountability ◽  
Sovereign Debt Crisis ◽  
Underlying Causes ◽  
The Eu

AbstractThis chapter will sketch how the EU has reacted to the financial crisis and in particular to the unfolding sovereign debt crisis, revealing major flaws in EMU’s architecture. It will not only address these design flaws but attempt to evaluate the underlying causes, reasons and motives of the architects and decision takers by comparing the more “federalist” Werner Plan with the more “intergovernmental” blueprint of the EMU of the Maastricht Treaty, connect it with the paradigm change on economic governance discussed by Schulmeister in Chap. 10.1007/978-3-030-54895-7_2 and show the consequences for the crisis and its management in terms of efficiency, equity and democratic accountability.

Economic Crisis and its Impact on Regionalism and Globalism

2016 ◽  
pp. 1841-1863
Author(s):  
Baris Kablamaci ◽  
Giray Gozgor
Keyword(s):  
International Trade ◽  
Financial Crisis ◽  
Economic Crisis ◽  
Sovereign Debt ◽  
Debt Crisis ◽  
Sovereign Debt Crisis ◽  
Historical Pattern ◽  
Recent Developments ◽  
Great Trade Collapse ◽  
Financial Crisis Of 2008

This chapter reviews the financial crisis of 2008-09 and its impacts on the international trade in terms of regionalism and globalism. The chapter glances over different aspects of globalism and regionalism as well as looks on historical pattern and recent developments of regionalism and globalism. The data used in the chapter indicates that the financial crisis of 2008-09 negatively affected both globalization and regionalization trends. In addition, the EU has experienced an interesting transformation from regionalism to globalism. This chapter suggests that the issue is not only related with the great trade collapse of 2008-09 but also the sovereign debt crisis of 2010-12.

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