Systemic Sovereign Credit Risk: Lessons from the U.S. And Europe
46 Pages Posted: 2 May 2011 Last revised: 28 May 2023
There are 4 versions of this paper
Systemic Sovereign Credit Risk: Lessons from the U.S. and Europe
Systemic Sovereign Credit Risk: Lessons from the U.S. and Europe
Systemic Sovereign Credit Risk: Lessons from the U.S. and Europe
Date Written: April 2011
Abstract
We study the nature of systemic sovereign credit risk using CDS spreads for the U.S. Treasury, individual U.S. states, and major European countries. Using a multifactor affine framework that allows for both systemic and sovereign-specific credit shocks, we find that there is considerable heterogeneity across U.S. and European issuers in their sensitivity to systemic risk. U.S. and Euro systemic shocks are highly correlated, but there is much less systemic risk among U.S. sovereigns than among European sovereigns. We also find that U.S. and European systemic sovereign risk is strongly related to financial market variables. These results provide strong support for the view that systemic sovereign risk has its roots in financial markets rather than in macroeconomic fundamentals.
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
How Sovereign is Sovereign Credit Risk?
By Francis A. Longstaff, Jun Pan, ...
-
A Pyrrhic Victory? - Bank Bailouts and Sovereign Credit Risk
By Viral V. Acharya, Itamar Drechsler, ...
-
A Pyrrhic Victory? Bank Bailouts and Sovereign Credit Risk
By Viral V. Acharya, Itamar Drechsler, ...
-
A Pyrrhic Victory? Bank Bailouts and Sovereign Credit Risk
By Viral V. Acharya, Itamar Drechsler, ...
-
A Pyrrhic Victory? Bank Bailouts and Sovereign Credit Risk
By Viral V. Acharya, Itamar Drechsler, ...
-
Globalization and Risk Sharing
By Fernando Broner and Jaume Ventura
-
Globalization and Risk Sharing
By Fernando Broner and Jaume Ventura
-
Globalization and Risk Sharing
By Fernando Broner and Jaume Ventura
-
Sovereign Risk and Secondary Markets
By Fernando Broner, Alberto Martin, ...
-
Sovereign Risk and Secondary Markets
By Fernando Broner, Alberto Martin, ...