Sovereign to Corporate Risk Spillovers

Augustin, Patrick; Boustanifar, Hamid; Breckenfelder, Johannes; Schnitzler, Jan

doi:10.1111/jmcb.12497

Cited by 72 publications

(41 citation statements)

References 83 publications

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“…A government's distress may be felt by its nonfinancial corporations, as any financial pain at the level of the sovereign may be passed on through a hike in corporate tax rates, reduced investments in public infrastructure, or lower subsidies, which could harm long-term growth. Augustin et al (2015a) exploit the first Greek bailout on April 11, 2010, which was a shock to the sovereign credit risk of all European countries, to document a sovereign-to-corporate risk transfer. Public ownership, financial dependence, and the sovereign ceiling are channels that appear to increase the interdependence between sovereign and corporate credit risk.…”

Section: Corporate and Sovereign Credit Riskmentioning

confidence: 99%

Credit Default Swaps: Past, Present, and Future

Augustin

Subrahmanyam

Tang

et al. 2016

Annu. Rev. Financ. Econ.

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Credit default swaps (CDS) have grown to be a multi-trillion-dollar, globally important market. The academic literature on CDS has developed in parallel with the market practices, public debates, and regulatory initiatives in this market. We selectively review the extant literature, identify remaining gaps, and suggest directions for future research. We present a narrative including the following four aspects. First, we discuss the benefits and costs of CDS, emphasizing the need for more research in order to better understand the welfare implications. Second, we provide an overview of the postcrisis market structure and the new regulatory framework for CDS. Third, we place CDS in the intersection of law and finance, focusing on agency conflicts and financial intermediation. Last, we examine the role of CDS in international finance, especially during and after the recent sovereign credit crises. 10.1

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Section: Corporate and Sovereign Credit Riskmentioning

confidence: 99%

Credit Default Swaps: Past, Present, and Future

Augustin

Subrahmanyam

Tang

et al. 2016

Annu. Rev. Financ. Econ.

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“…One channel is through risk transmission from foreign to domestic banks, for example due to cross-border exposures and financial contagion (e.g., Degryse et al (2010), Tressel (2010)). Similarly, contagion can cause risk transmission across sovereigns, and was arguably present during the most severe phases of the euro area sovereign debt crisis (e.g., Lucas et al (2014), Benzoni et al (2015), Kallestrup et al (2016), or Augustin et al (2018)). Such cross-border bank-to-bank and sovereign-to-sovereign risk transmission can worsen the domestic doom loop.…”

Section: Introductionmentioning

confidence: 99%

Bank to sovereign risk spillovers across borders: Evidence from the ECB’s Comprehensive Assessment

Breckenfelder

Schwaab

2018

Journal of Empirical Finance

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“…One feature of the literature is the overwhelming emphasis on the transmission of risks between banks and sovereigns. 2 Augustin et al (2018) and Bedendo and Colla (2015) are exceptions. Nevertheless, in common with our study and the literature more generally, there is also a preference to relying on CDS spreads (e.g., Acharya et al, 2014;Bedendo & Colla, 2015;Betz et al, 2016;Breckenfelder & Schwaab, 2018).…”

Section: Introductionmentioning

confidence: 99%

Analyzing credit risk transmission to the nonfinancial sector in Europe: A network approach

Gross

Siklos

2019

J of Applied Econometrics

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Summary We use a factor model and elastic net shrinkage to model a high‐dimensional network of European credit default swap (CDS) spreads. Our empirical approach allows us to assess the joint transmission of bank and sovereign risk to the nonfinancial corporate sector. Our findings identify a sectoral clustering in the CDS network, where financial institutions are in the center and nonfinancial entities as well as sovereigns are grouped around the financial center. The network has a geographical component reflected in different patterns of real‐sector risk transmission across countries. Our framework also provides dynamic estimates of risk transmission, a useful tool for systemic risk monitoring.

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Sovereign to Corporate Risk Spillovers

Cited by 72 publications

References 83 publications

Credit Default Swaps: Past, Present, and Future

Credit Default Swaps: Past, Present, and Future

Bank to sovereign risk spillovers across borders: Evidence from the ECB’s Comprehensive Assessment

Analyzing credit risk transmission to the nonfinancial sector in Europe: A network approach

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