Arbeitspapier
Conditional Probabilities and Contagion Measures for Euro Area Sovereign Default Risk
We propose a novel empirical framework to assess the likelihood of joint and conditional failure for Euro area sovereigns. Our model is based on a dynamic skewed-t copulawhich captures all the salient features of the data, including skewed and heavy-tailed changes in the price of CDS protection against sovereign default, as well as dynamicvolatilities and correlations to ensure that failure dependence can increase in times of stress. We apply the framework to Euro area sovereign CDS spreads from 2008 tomid-2011. Our results reveal significant time-variation in risk dependence and considerable spill-over effects in the likelihood of sovereign failures. We also investigatedistress dependence around a key policy announcement by Euro area heads of state on May 9, 2010, and demonstrate the importance of capturing higher-order time-varyingmoments during times of crisis for the correct assessment of interacting risks.
- Sprache
-
Englisch
- Erschienen in
-
Series: Tinbergen Institute Discussion Paper ; No. 11-176/2/DSF29
- Klassifikation
-
Wirtschaft
Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- Thema
-
sovereign credit risk
higher order moments
time-varying parameters
financial stability
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Zhang, Xin
Schwaab, Bernd
Lucas, Andre
- Ereignis
-
Veröffentlichung
- (wer)
-
Tinbergen Institute
- (wo)
-
Amsterdam and Rotterdam
- (wann)
-
2011
- Handle
- Letzte Aktualisierung
-
20.09.2024, 08:23 MESZ
Datenpartner
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ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Zhang, Xin
- Schwaab, Bernd
- Lucas, Andre
- Tinbergen Institute
Entstanden
- 2011
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