Market variables and CDS spreads: evidences on the Eurozone banks, Conference Proceedings in International Academic Conference on Business & Economics, ISBN 978-0-9965808-7-8, New York City, 11-13 June 2017
Author(s)
Angelini, Eliana
Ortolano, Alessandra
Date Issued
2017
Type
conferenceObject
Abstract
The paper investigates empirically credit risk perception in Eurozone CDS banking sector,
during the period of the sovereign crisis 2009-2014. As CDS spreads represent the cost to ensure
from credit risk, their level is an interesting variable in order to evaluate the riskiness of
banks. We first verify the lacking ability of balance sheet ratios as indicators of banks’ creditworthiness:
our finding are consistent with recent literature. Then we focus on the impact
of market factors as explanatory variables for banks CDS spread. Our results significant for
Euribor and Trading Volume and are strengthened adding EIU Overall Country Risk Rating,
as dummy variable. The latter has a strong impact on CDS spreads, confirming the spillovers
of sovereign risk rating on banking credit risk evaluation. In light of our findings, we suggest
to proceed studying the impact of systemic risk as trigger of banking CDS spread during
periods of distress.
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