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dc.contributor.authorCalice, Giovannien
dc.contributor.authorIoannidis, Christosen
dc.contributor.authorWilliams, Julianen
dc.date.accessioned2011-09-23-
dc.date.accessioned2011-12-01T13:03:54Z-
dc.date.available2011-12-01T13:03:54Z-
dc.date.issued2011-
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
dc.language.isoengen
dc.publisher|aCenter for Economic Studies and ifo Institute (CESifo) |cMunichen
dc.relation.ispartofseries|aCESifo Working Paper |x3583en
dc.subject.jelC32en
dc.subject.jelG21en
dc.subject.jelG33en
dc.subject.ddc330en
dc.subject.keyworddistance of defaulten
dc.subject.keywordcredit derivativesen
dc.subject.keywordcredit default swap indexen
dc.subject.keywordfinancial stabilityen
dc.titleCredit Derivatives and the Default Risk of Large Complex Financial Institutions-
dc.typeWorking Paperen
dc.identifier.ppn66875477Xen
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen

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