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Bank and Sovereign Debt Risk Connection
(2013-01-01)
Euro area data show a positive connection between sovereign and bank risk, which increases with banks’ and sovereign long run fragility. We build a macro model with banks subject to moral hazard and liquidity risk (sudden ...
Systemic Risk and Sovereign Debt in the Euro Area
(2013-12-13)
We introduce a new measure of systemic risk, the change in the conditional joint probability of default, which assesses the effects of the interdependence in the financial system on the general default risk of sovereign ...
Trust Me! I am a European Central Banker
(2012-06-01)
In the aftermath of the financial crisis, the ECB has experienced an unprecedented deterioration in the level of trust. This raises the question as to what factors determine trust in central banking. We use a unique ...
Mutual Excitation in Eurozone Sovereign CDS
(2014-05-01)
We study self- and cross-excitation of shocks in the Eurozone sovereign CDS market. We adopt a multivariate setting with credit default intensities driven by mutually exciting jump processes, to capture the salient features ...
Direct and Indirect Risk-Taking Incentives of Inside Debt
(2016-07-16)
We develop a model of managerial compensation structure and asset risk choice. The model provides predictions about the relation between credit spreads and different compensation components. First, we show that credit ...
Assessing Systemic Fragility – a Probabilistic Perspective
(2014-10-01)
We outline a procedure for consistent estimation of marginal and joint default risk in the euro area financial system. We interpret the latter risk as the intrinsic financial system fragility and derive several systemic ...
Does Austerity Pay Off?
(2015-02-01)
We ask whether cuts of government consumption lower or raise the sovereign default premium. To address this question, we set up a new data set for 38 emerging and advanced economies which contains quarterly time-series ...
Sovereign Credit Risk, Liquidity, and ECB Intervention: Deus Ex Machina?
(2016-11-18)
We examine the dynamic relation between credit risk and liquidity in the Italian sovereign bond market during the Euro-zone crisis and the subsequent European Central Bank (ECB) interventions. Credit risk drives the liquidity ...
Measuring Sovereign Contagion in Europe
(2015-04-01)
This paper analyzes sovereign risk shift-contagion, i.e. positive and significant changes in the propagation mechanisms, using bond yield spreads for the major eurozone countries. By emphasizing the use of two econometric ...
Competition in Treasury Auctions
(2016-02-01)
We investigate the role of competition on the outcome of Austrian Treasury auctions. Austria's EU accession led to an increase in the number of banks participating in treasury auctions. We use structural estimates of ...