|
|
|
|
||||
|
||||
Financial Sector Linkages and the Dynamics of Bank and Sovereign Credit SpreadsRene KallestrupCapital Four Management David LandoCopenhagen Business School - Department of Finance Agatha MurgociCopenhagen Business School - Department of Finance March 28, 2013 Abstract: We show that cross-border financial linkages are priced in CDS markets. We construct a measure of the foreign exposure risk of a country's banking system based on the composition of its foreign exposures. Our measure helps explain CDS premia of banks. Implicit and explicit guarantees extended to a country's banking system in turn aff ect the CDS premia of the sovereign. As a consequence, foreign exposures of banks impact the dynamics of sovereign CDS spreads. Another measure including both foreign and domestic assets of the banks is highly signi cant in explaining bank CDS spreads even before the onset of the crisis.
Number of Pages in PDF File: 64 Keywords: Credit risk, banks, sovereign risk JEL Classification: G01, G15, G21 working papers seriesDate posted: March 17, 2012 ; Last revised: April 16, 2013Suggested CitationContact Information
|
|
|||||||||||||||||||||||||||||||
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
FAQ
Terms of Use
Privacy Policy
Copyright
This page was processed by apollo4 in 0.515 seconds
