Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153599
Authors: 
Berg, Tobias
Year of Publication: 
2010
Series/Report no.: 
ECB Working Paper 1165
Abstract: 
This study calibrates the term structure of risk premia before and during the 2007/2008 financial crisis using a new calibration approach based on credit default swaps. The risk premium term structure was flat before the crisis and downward sloping during the crisis. The instantaneous risk premium increased significantly during the crisis, whereas the long-run mean of the risk premium process was of the same magnitude before and during the crisis. These findings suggest that (marginal) investors have become more risk averse during the crisis. Investors were, however, well aware that risk premia will revert back to normal levels in the long run.
Subjects: 
Credit risk
Equity premium
Mean reversion
risk premia
structural models of default
JEL: 
G12
G13
Document Type: 
Working Paper

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