Financial Sector Linkages and the Dynamics of Bank and Sovereign Credit Spreads

René Kallestrup, David Lando, Agatha Murgoci

Publikation: Bidrag til konferencePaperForskningpeer review

Resumé

We show that banks' foreign asset holdings are significant determinants of bank and sovereign CDS premia. Our analysis uses detailed
data on the composition and risk of banks' foreign exposures. For the largest banks, a one standard deviation change in our foreign-
exposure risk measure leads to a 30 basis point change in the CDS premia. Further, we show that sovereign CDS premia are significantly
affected by the foreign exposures of their domestic banks. We quantify how this global spillover effect depends on the size and riskiness of the
sovereign's implicit and explicit guarantees extended to its domestic banking system.
We show that banks' foreign asset holdings are significant determinants of bank and sovereign CDS premia. Our analysis uses detailed
data on the composition and risk of banks' foreign exposures. For the largest banks, a one standard deviation change in our foreign-
exposure risk measure leads to a 30 basis point change in the CDS premia. Further, we show that sovereign CDS premia are significantly
affected by the foreign exposures of their domestic banks. We quantify how this global spillover effect depends on the size and riskiness of the
sovereign's implicit and explicit guarantees extended to its domestic banking system.

Konference

KonferenceConferinta Stiintifica Anuala a Economistilor Romani din Mediul Academic din Strainatate. ERMAS 2014
LokationUniversitatea Babes-Bolyai
LandRumænien
ByCluj-Napoca
Periode18/08/201422/08/2014
Internetadresse

Emneord

  • Credit risk
  • Banks
  • Sovereign risk

Citer dette

Kallestrup, R., Lando, D., & Murgoci, A. (2014). Financial Sector Linkages and the Dynamics of Bank and Sovereign Credit Spreads. Afhandling præsenteret på Conferinta Stiintifica Anuala a Economistilor Romani din Mediul Academic din Strainatate. ERMAS 2014, Cluj-Napoca , Rumænien.
Kallestrup, René ; Lando, David ; Murgoci, Agatha. / Financial Sector Linkages and the Dynamics of Bank and Sovereign Credit Spreads. Afhandling præsenteret på Conferinta Stiintifica Anuala a Economistilor Romani din Mediul Academic din Strainatate. ERMAS 2014, Cluj-Napoca , Rumænien.73 s.
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Kallestrup, R, Lando, D & Murgoci, A 2014, 'Financial Sector Linkages and the Dynamics of Bank and Sovereign Credit Spreads' Paper fremlagt ved Conferinta Stiintifica Anuala a Economistilor Romani din Mediul Academic din Strainatate. ERMAS 2014, Cluj-Napoca , Rumænien, 18/08/2014 - 22/08/2014, .

Financial Sector Linkages and the Dynamics of Bank and Sovereign Credit Spreads. / Kallestrup, René; Lando, David; Murgoci, Agatha.

2014. Afhandling præsenteret på Conferinta Stiintifica Anuala a Economistilor Romani din Mediul Academic din Strainatate. ERMAS 2014, Cluj-Napoca , Rumænien.

Publikation: Bidrag til konferencePaperForskningpeer review

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N2 - We show that banks' foreign asset holdings are significant determinants of bank and sovereign CDS premia. Our analysis uses detaileddata on the composition and risk of banks' foreign exposures. For the largest banks, a one standard deviation change in our foreign-exposure risk measure leads to a 30 basis point change in the CDS premia. Further, we show that sovereign CDS premia are significantlyaffected by the foreign exposures of their domestic banks. We quantify how this global spillover effect depends on the size and riskiness of thesovereign's implicit and explicit guarantees extended to its domestic banking system.

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Kallestrup R, Lando D, Murgoci A. Financial Sector Linkages and the Dynamics of Bank and Sovereign Credit Spreads. 2014. Afhandling præsenteret på Conferinta Stiintifica Anuala a Economistilor Romani din Mediul Academic din Strainatate. ERMAS 2014, Cluj-Napoca , Rumænien.