Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/264744 
Year of Publication: 
2009
Series/Report no.: 
Working Paper No. 152
Publisher: 
Oesterreichische Nationalbank (OeNB), Vienna
Abstract: 
This paper uses regression analysis to compare the market pricing of the default risk of banks to that of other firms. We study how CDS traders discriminate between banks and other type of firms and how their judgement changes over time, in particular, since the start of the recent financial turmoil. We use monthly data on the Credit Default Swaps (CDS) of 41 major banks and 162 non-banks. By means of panel analysis, we decompose the CDS premia into the expected loss and the risk premium. Our primary result is that market participants indeed viewed banks differently and that they drastically changed their mind during the recent turmoil that started in August 2007.
Subjects: 
Credit default swap
market discipline
default risk
risk premium
JEL: 
E43
G12
G13
Document Type: 
Working Paper

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