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Kezdőlap Média Kisokos Kutatás és publikációk Statisztika Monetáris politika Az €uro Fizetésforgalom és piacok Karrier
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Stefano Giglio

28 June 2016
WORKING PAPER SERIES - No. 15
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Abstract
This paper measures the joint default risk of financial institutions by exploiting information about counterparty risk in credit default swaps (CDS). A CDS contract written by a bank to insure against the default of another bank is exposed to the risk that both banks default. From CDS spreads we can then learn about the joint default risk of pairs of banks. From bond prices we can learn the individual default probabilities. Since knowing individual and pairwise probabilities is not sufficient to fully characterize multiple default risk, I derive the tightest bounds on the probability that many banks fail simultaneously.
JEL Code
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy