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dc.contributor.authorCalice, Giovannien_US
dc.contributor.authorIoannidis, Christosen_US
dc.contributor.authorWilliams, Julianen_US
dc.date.accessioned2011-09-23en_US
dc.date.accessioned2011-12-01T13:03:54Z-
dc.date.available2011-12-01T13:03:54Z-
dc.date.issued2011en_US
dc.identifier.urihttp://hdl.handle.net/10419/52454-
dc.description.abstractThis paper addresses the impact of developments in the credit risk transfer market on the viability of a group of systemically important financial institutions. We propose a bank default risk model, in the vein of the classic Merton-type, which utilizes a multi-equation framework to model forward-looking measures of market and credit risk using the credit default swap (CDS) index market as a measure of the global credit environment. In the first step, we establish the existence of significant detrimental volatility spillovers from the CDS market to the banks' equity prices, suggesting a credit shock propagation channel which results in serious deterioration of the valuation of banks' assets. In the second step, we show that substantial capital injections are required to restore the stability of the banking system to an acceptable level after shocks to the CDX and iTraxx indices. Our empirical evidence thus informs the relevant regulatory authorities on the magnitude of banking systemic risk jointly posed by CDS markets.en_US
dc.language.isoengen_US
dc.publisherCESifo Münchenen_US
dc.relation.ispartofseriesCESifo working paper: Monetary Policy and International Finance 3583en_US
dc.subject.jelC32en_US
dc.subject.jelG21en_US
dc.subject.jelG33en_US
dc.subject.ddc330en_US
dc.subject.keyworddistance of defaulten_US
dc.subject.keywordcredit derivativesen_US
dc.subject.keywordcredit default swap indexen_US
dc.subject.keywordfinancial stabilityen_US
dc.titleCredit Derivatives and the Default Risk of Large Complex Financial Institutionsen_US
dc.typeWorking Paperen_US
dc.identifier.ppn66875477Xen_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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