Bank dominance: Financial sector determinants of sovereign risk premia
Abstract/Contents
- Abstract
- This paper investigates the persistence, extent and nature of the correlation between banking and sovereign credit risk in the European financial crisis. I use Credit Default Swap (CDS) premia on sovereigns as a measure of sovereign risk while using a specially constructed CDS Banking Risk Index (BRI) to measure the financial sector risk of each country. This paper finds that there is “bank dominance” in the determination of sovereign risk premia in the European financial crisis even when fiscal variables are included in the estimation. The Banking Risk Index is the primary statistically significant determinant of sovereign risk premia in the crisis period. Moreover, this paper finds that the correlation between banking and sovereign risk increases with an increase in the financial sector risk, measured by the BRI—in times of greater financial sector risk, banking and sovereign risk are jointly evaluated in the market, even more so than usual.
Description
| Type of resource | text |
|---|---|
| Date created | May 2013 |
Creators/Contributors
| Author | Thukral, Mohit | |
|---|---|---|
| Primary advisor | Duffie, Darrell | |
| Degree granting institution | Stanford University, Department of Economics |
Subjects
| Subject | Stanford Department of Economics |
|---|---|
| Genre | Thesis |
Bibliographic information
| Related item | |
|---|---|
| Location | https://purl.stanford.edu/yg825bt6585 |
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Preferred citation
- Preferred Citation
- Thukral, Mohit. (2013). Bank dominance: Financial sector determinants of sovereign risk premia. Stanford Digital Repository. Available at: https://purl.stanford.edu/yg825bt6585
Collection
Stanford University, Department of Economics, Honors Theses
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