G2TT
来源类型Discussion paper
规范类型论文
来源IDDP12857
DP12857 Sovereign credit risk and exchange rates: Evidence from CDS quanto spreads
Mikhail Chernov; Patrick Augustin
发表日期2018-04-10
出版年2018
语种英语
摘要Sovereign CDS quanto spreads - the difference between CDS premiums denominated in U.S. dollars and a foreign currency - tell us how financial markets view the interaction between a country's likelihood of default and associated currency devaluations (the Twin Ds). A noarbitrage model applied to the term structure of quanto spreads can isolate the interaction between the Twin Ds and gauge the associated risk premiums. We study countries in the Eurozone because their quanto spreads pertain to the same exchange rate and monetary policy, allowing us to link cross-sectional variation in their term structures to cross-country differences in fiscal policies. The ratio of the risk-adjusted to the true default intensities is 2, on average. Conditional on the occurrence of default, the true and risk-adjusted 1-week probabilities of devaluation are 5% and 77%, respectively. The risk premium for the euro devaluation in case of default exceeds the regular currency premium by up to 0.3% per week.
主题Financial Economics
关键词Credit default swaps Exchange rates Credit risk Sovereign debt Contagion
URLhttps://cepr.org/publications/dp12857
来源智库Centre for Economic Policy Research (United Kingdom)
资源类型智库出版物
条目标识符http://119.78.100.153/handle/2XGU8XDN/541668
推荐引用方式
GB/T 7714
Mikhail Chernov,Patrick Augustin. DP12857 Sovereign credit risk and exchange rates: Evidence from CDS quanto spreads. 2018.
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