2014
DOI: 10.1080/14697688.2014.932919
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Estimating the probability of multiple EU sovereign defaults using CDS and bond data

Abstract: The on-going EU sovereign debt crisis is causing great concern about the sustainability of national debt issued by the member states. In this paper, we propose a methodology to estimate the likelihood of the default of one or more countries in the Euro Area by extending the approach in Pianeti et al. (2012) to the case of multiple defaults. We provide an assessment of the marginal, the joint and the conditional default probabilities within the Euro Zone. The adopted measure of systemic risk is the probability … Show more

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Cited by 8 publications
(5 citation statements)
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References 34 publications
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“…This country selection is in line with previous researches (see e.g. Reboredo and Ugolini 2015;Fabozzi et al 2016;Pianeti and Giacometti 2015;Alter and Schüler 2012;Baglioni and Cherubini 2013;Kalbaskaa and Gatkowskiba 2012). We also point out that our banks' selection is consistent with the European Banking Authority (EBA) stress-test excercise, proving that our data are representative of the banking system of the relative countries.…”
Section: Datasupporting
confidence: 91%
See 1 more Smart Citation
“…This country selection is in line with previous researches (see e.g. Reboredo and Ugolini 2015;Fabozzi et al 2016;Pianeti and Giacometti 2015;Alter and Schüler 2012;Baglioni and Cherubini 2013;Kalbaskaa and Gatkowskiba 2012). We also point out that our banks' selection is consistent with the European Banking Authority (EBA) stress-test excercise, proving that our data are representative of the banking system of the relative countries.…”
Section: Datasupporting
confidence: 91%
“…A first stream of literature aimed at assessing risk from a systemic perspective, focuses on the identification of common risk drivers, measuring the role of different factors in the determination of risk for different institutions using econometric techniques (see e.g. Ang and Longstaff 2013;Fontana et al 2016;Fabozzi et al 2016;Pianeti and Giacometti 2015;Alter and Schüler 2012;De Bruyckere et al 2013;Kalbaskaa and Gatkowskiba 2012;Manzo and Picca 2020). Other works aim to quantify the systemic risk contribution or exposure for individual banks, among the most relevant, we can cite CoVaR (Adrian et Al.…”
Section: Introductionmentioning
confidence: 99%
“…Since the last two crises, sovereign CDS market of developed countries has attracted growing attention. The most popular topics treated in this field are: sovereign CDS spreads determinants (Gibson, Hall, & Tavlas, 2014;Groba, Lafuente, & Serrano, 2013;Kim, Loretan, & Remolona, 2010); sovereign CDS spreads decomposition into a set of risks (Badaoui, Cathcart, & El-Jahel, 2013;Beirne & Fratzscher, 2013;Broto & Pérez-Quiros, 2015;Longstaff, Pan, Pedersen, & Singleton, 2011) and the eventual credit risk transmission from the sovereign CDS market to the underlying sovereign bond market (Arce, Mayordomo, & Pena, 2013;Fontana & Scheicher, 2010;Pianeti & Giacometti, 2015) and to some financial product markets.…”
Section: Literature Reviewmentioning
confidence: 99%
“…Lucas, Schwaab, and Zhang (2014) propose a dynamic skewed t-distribution to assess the likelihood of joint and conditional sovereign default from observed credit default swap (CDS) prices. Pianeti and Giacometti (2015) introduce a multivariate model based on bond and CDS data to estimate the joint probabilities of default of multiple sovereigns within the EA. Our study differs from the aforementioned studies since we focus on the systemic risk of higher dimensions.…”
Section: Introductionmentioning
confidence: 99%
“…Our study differs from the aforementioned studies since we focus on the systemic risk of higher dimensions. For example, Lucas et al (2014) and Pianeti and Giacometti (2015) focus only on the systemic risk of the European sovereign system and estimate their systemic risk measures for samples consisting of 10 and 11 sovereigns, respectively. Our study examines the systemic risk of both the sovereign and banking systems by using a sample of 14 sovereigns and 40 banks.…”
Section: Introductionmentioning
confidence: 99%