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We show that nancial linkages between banks across borders are priced in the CDS markets beyond what can be explained by exposure to common factors. Information on the relative size and riskiness of aggregate exposures of banks in one country to non-nationals is used to construct a dynamic measure of the risk arising from cross-border exposures. We also construct a measure which in addition takes into account the relative size and riskiness of bank exposures to domestic government bonds and other domestic residents. Both measures help explaining the dynamics of bank CDS premia after controlling for country specic and global risk factors. Finally, a dynamic measure of the size of the implicit guarantee, that the sovereign may be assumed to extend for the domestic banking system, strongly impacts sovereign CDS premia.

Publikationsoplysninger

OriginalsprogEngelsk
Publikationsdato2012
Antal sider44
DOI
StatusUdgivet - 2012
BegivenhedThe 39th European Finance Association Annual Meeting (EFA 2012) - Frederiksberg, Danmark

Konference

KonferenceThe 39th European Finance Association Annual Meeting (EFA 2012)
Nummer39
LokationCopenhagen Business School
LandDanmark
ByFrederiksberg
Periode15/08/201218/08/2012
Internetadresse

    Emneord

  • Credit risk, Banks, Sovereign risk

ID: 38120991