What Is The Risk Of European Sovereign Debt Defaults Fiscal Space Cds Spreads And Market Pricing Of Risk
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What Is The Risk Of European Sovereign Debt Defaults Fiscal Space Cds Spreads And Market Pricing Of Risk
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Author : Joshua Aizenman
language : en
Publisher:
Release Date : 2011
What Is The Risk Of European Sovereign Debt Defaults Fiscal Space Cds Spreads And Market Pricing Of Risk written by Joshua Aizenman and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with Debts, Public categories.
We estimate the pricing of sovereign risk for sixty countries based on fiscal space (debt/tax; deficits/tax) and other economic fundamentals over 2005-10. We measure how accurately the model predicts sovereign credit default swap (CDS) spreads, focusing in particular on the five countries in the South-West Eurozone Periphery (Greece, Ireland, Italy, Portugal, and Spain). Dynamic panel estimates of the model suggest that fiscal space and other macroeconomic factors are statistically significant and economically important determinants of market-based sovereign risk. Although the explanatory power of fiscal space measures drop during the crisis, the TED spread, trade openness, external debt and inflation play a larger role. As expectations of market volatility jumped during the crisis, the weakly concavity of creditors' payoff probably accounts for the emergence of TED spread as a key pricing factor. However, risk-pricing of the South-West Eurozone Periphery countries is not predicted accurately by the model either in-sample or out-of-sample: unpredicted high spreads are evident during global crisis period, especially in 2010 when the sovereign debt crisis swept over the periphery area. We "match" the periphery group with five middle income countries outside Europe that were closest in terms of fiscal space during the European fiscal crisis. We find that Eurozone periphery default risk is priced much higher than the "matched" countries in 2010, even allowing for differences in fundamentals. One interpretation is that the market has mispriced risk in the Eurozone periphery. An alternative interpretation is that the market is pricing not on current fundamentals but future fundamentals, expecting the periphery fiscal space to deteriorate markedly and posing a high risk of debt restructuring. Adjustment challenges of the Eurozone periphery may be perceived as economically and politically more difficult than the matched group of middle income countrie.
What Is The Risk Of European Sovereing Debt Defaults Fiscal Space Cds Spreads And Market Pricing Of Risk
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Author : Joshua Aizenman
language : en
Publisher:
Release Date : 2011
What Is The Risk Of European Sovereing Debt Defaults Fiscal Space Cds Spreads And Market Pricing Of Risk written by Joshua Aizenman and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with categories.
The World Scientific Handbook Of Futures Markets
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Author : Anastasios G. E. T. Al MALLIARIS
language : en
Publisher: World Scientific
Release Date : 2015-08-06
The World Scientific Handbook Of Futures Markets written by Anastasios G. E. T. Al MALLIARIS and has been published by World Scientific this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015-08-06 with Business & Economics categories.
"The World Scientific Handbook of Futures Markets serves as a definitive source for comprehensive and accessible information in futures markets. The emphasis is on the unique characteristics of futures markets that make them worthy of a special volume. In our judgment, futures markets are currently undergoing remarkable changes as trading is shifting from open outcry to electronic and as the traditional functions of hedging and speculation are extended to include futures as an alternative investment vehicle in traditional portfolios. The unique feature of this volume is the selection of five classic papers that lay the foundations of the futures markets and the invitation to the leading academics who do work in the area to write critical surveys in a dozen important topics."--$cProvided by publisher.
The Risk Of The Sovereign Debt Default
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Author : Theodoros V. Stamatopoulos
language : en
Publisher:
Release Date : 2016
The Risk Of The Sovereign Debt Default written by Theodoros V. Stamatopoulos and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
We investigate the relationship of the market pricing of sovereign risk to default, through CDS spreads for 16 Eurozone countries during 2008q1-2013q3. We take into account, through appropriate non-linear GMM estimations the endogeneity problem. We focus on “fiscal space” (DEBT or FISCAL), and the downgrade announcements (DOWN). We find DEBT (FISCAL) to have significant (insignificant) effects on the CDS concave function, as well as, DOWN in a linear one. It has also been confirmed significant pricing discrimination between South and West Euro Area Periphery (SWEAP) and the core Eurozone, highlighting asymmetries discovered either by the respective size of estimated DEBT coefficients or by the significant effects of DOWN that have only on CDS of SWEAP countries. The current account balance or the inflation rate, as well as, relevant interaction terms seem not to affect the spreads of the EMU. These findings, together with the estimated structural change on CDS pattern in early 2011, coinciding with significant either the DOWN in the pre-crisis period (2008-'10) or the DEBT in the post-crisis one (2011-'13) on the CDS, seem to be consistent with self-fulfilling crises literature and the inherent vulnerability of EMU, on other words, the “fragility hypothesis of the Eurozone”
Transmission Of Financial Stress In Europe
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Author : Ms.Brenda Gonzalez-Hermosillo
language : en
Publisher: International Monetary Fund
Release Date : 2014-05-02
Transmission Of Financial Stress In Europe written by Ms.Brenda Gonzalez-Hermosillo and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014-05-02 with Business & Economics categories.
This paper proposes a stochastic volatility model to measure sovereign financial distress. It examines how key European sovereign credit default swap (CDS) spreads affect each other; specifically, the paper analyses the volatility structure of Germany, Greece, Ireland, Italy, Spain and Portugal. The stability of Germany is a close proxy for the resilience of the euro area as markets use Germany’s sovereign CDS as a hedge for systemic risk. Although most of the CDS changes for Germany during 2009–12 were due to idiosyncratic factors, market developments in Italy and Spain contributed significantly, likely due to their relative importance in the region. Changes in Greece’s sovereign CDS had no significant effect on Germany’s sovereign CDS despite initial widespread concerns about such linkages. Spain and Italy show a notable co-dependence in explaining each other’s volatility while Germany also plays an important role. It is found that extreme bad news led to persistent and nearly permanent effects on the stochastic volatility of European sovereign CDS spreads.
Sovereign Debt
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Author : Rob Quail
language : en
Publisher: John Wiley & Sons
Release Date : 2011-02-25
Sovereign Debt written by Rob Quail and has been published by John Wiley & Sons this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011-02-25 with Business & Economics categories.
An intelligent analysis of the dangers, opportunities, and consequences of global sovereign debt Sovereign debt is growing internationally at a terrifying rate, as nations seek to prop up their collapsing economies. One only needs to look at the sovereign risk pressures faced by Greece, Spain, and Ireland to get an idea of how big this problem has become. Understanding this dilemma is now more important than ever, that's why Robert Kolb has compiled Sovereign Debt. With this book as your guide, you'll gain a better perspective on the essential issues surrounding sovereign debt and default through discussions of national defaults, systemic risk, associated costs, and much more. Historical studies are also included to provide a realistic framework of reference. Contains up-to-date research and analysis on sovereign debt from today's leading practitioners and academics Details the dangers of defaults and their associated systemic risks Explores the past, present, and future of sovereign debt The repercussions of a national default are all-encompassing as global markets are intricately interwoven in the modern world. Sovereign Debt examines what it will take to overcome the challenges of this market and how you can deal with the uncertainty surrounding it.
Sovereign Cds Spreads In Europe
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Author : Mr.Frigyes F Heinz
language : en
Publisher: International Monetary Fund
Release Date : 2014-01-28
Sovereign Cds Spreads In Europe written by Mr.Frigyes F Heinz and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014-01-28 with Business & Economics categories.
By analysing data from January 2007 to December 2012 in a panel GLS error correction framework we find that European countries’ sovereign CDS spreads are largely driven by global investor sentiment, macroeconomic fundamentals and liquidity conditions in the CDS market. But the relative importance of these factors changes over time. While during the 2008/09 crisis weak economic fundamentals (such as high current account decifit, worsening underlying fiscal balances, credit boom), a drop in liquidity and a spike in risk aversion contributed to high spreads in Central and Eastern and South-Eastern European (CESEE) countries, a marked improvement in fundamentals (e.g. reduction in fiscal deficit, narrowing of current balances, gradual economic recovery) explains the region’s resilience to financial market spillovers during the euro area crisis. Our generalised variance decomposition analyisis does not suggest strong direct spillovers from the euro area periphery. The significant drop in the CDS spreads between July 2012 and December 2012 was mainly driven by a decline in risk aversion as suggested by the model’s out of sample forecasts.
Credit Derivatives
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Author : John Kiff
language : en
Publisher: International Monetary Fund
Release Date : 2009-11-01
Credit Derivatives written by John Kiff and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009-11-01 with Business & Economics categories.
Credit derivative markets are largely unregulated, but calls are increasingly being made for changes to this "hands off" stance, amidst concerns that they helped to fuel the current financial crisis, or that they could be a cause of the next one. The purpose of this paper is to address two basic questions: (i) do credit derivative markets increase systemic risk; and (ii) should they be regulated more closely, and if so, how and to what extent? The paper begins with a basic description of credit derivative markets and recent events, followed by an assessment of their recent association with systemic risk. It then reviews and evaluates some of the authorities'' proposed initiatives, and discusses some alternative directions that could be taken.
The Pricing Of Sovereign Risk And Contagion During The European Sovereign Debt Crisis
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Author : John Beirne
language : en
Publisher:
Release Date : 2012
The Pricing Of Sovereign Risk And Contagion During The European Sovereign Debt Crisis written by John Beirne and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with Country risk categories.
The paper analyses the drivers of sovereign risk for 31 advanced and emerging economies during the European sovereign debt crisis. It shows that a deterioration in countries' fundamentals and fundamentals contagion - a sharp rise in the sensitivity of financial markets to fundamentals - are the main explanations for the rise in sovereign yield spreads and CDS spreads during the crisis, not only for euro area countries but globally. By contrast, regional spillovers and contagion have been less important, including for euro area countries. The paper also finds evidence for herding contagion - sharp, simultaneous increases in sovereign yields across countries - but this contagion has been concentrated in time and among a few markets. Finally, empirical models with economic fundamentals generally do a poor job in explaining sovereign risk in the pre-crisis period for European economies, suggesting that the market pricing of sovereign risk may not have been fully reflecting fundamentals prior to the crisis.
Managing The Sovereign Bank Nexus
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Author : Mr.Giovanni Dell'Ariccia
language : en
Publisher: International Monetary Fund
Release Date : 2018-09-07
Managing The Sovereign Bank Nexus written by Mr.Giovanni Dell'Ariccia and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018-09-07 with Business & Economics categories.
This paper reviews empirical and theoretical work on the links between banks and their governments (the bank-sovereign nexus). How significant is this nexus? What do we know about it? To what extent is it a source of concern? What is the role of policy intervention? The paper concludes with a review of recent policy proposals.