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5 Ergebnisse
Bereich: Suchergebnisse
Publikation Evolution of sovereign risk of european G-SIBs(Springer, 2024) Alvarez, Loïc; Ters, Kristyna; Hüttche, TobiasThis chapter shows some evidence that sovereign risk remains a sigu0002nificant concern for European ‘Global Systemically Important Banks’ (G-SIBs) despite the lessons learned from the euro area sovereign debt crisis. Analysis of data from the European Banking Authority (EBA) reveals that many of these banks continue to hold substantial levels of sovereign debt exposure to GIIPS (Greece, Ireland, Italy, Portugal, and Spain) countries, with exposure ranging from 10% to 20%. Notably, UniCredit and Santander stand out with exposure levels exceeding 25% towards GIIPS nations, exposing them to potential sovereign risk from market disturbances within those countries. We also show that partial correlations between Credit Default Swaps (CDS) spreads of certain G-SIBs and GIIPS countries remain relatively high, likely influenced by the significant sovereign debt exposure these banks maintain. Furthermore, the high Debt-to-GDP ratios of GIIPS countries, along with the potential cascading effects of a government’s failure on financial institutions, highlight the interconnectedness and vulnerability of the European banking system. While regulatory frameworks like the Basel Accords have played a crucial role in maintaining financial stability, the approach to risk-weighted assets associated with sovereign debts remains contentious. The allowance for a 0% risk weight on sovereign bonds issued by EU member states, as part of the Capital Requirements Regulation (CRR), may incentivize increased holdings of such debts, amplifying sovereign risk. Moreover, High Quality Liquid Assets (HQLA) regulations encouraging banks to retain sovereign debt result in an increased risk for a new sovereign-bank nexus. Our findings reveal potential weaknesses within the European banking system, emphasizing the need for thorough scrutiny and systemic management of this persisting issue.04A - Beitrag SammelbandPublikation Price discovery in euro area sovereign credit markets: Evidence from the GIIPS countries 10 years after the implementation of the ban on naked short selling of CDS(Springer, 2024) Häusler, Sascha; Ters, Kristyna; Hüttche, TobiasWe analyze the price discovery process between credit spreads and credit default swaps (CDS) of sovereign credit risk in GIIPS countries (Greece, Ireland, Italy, Portugal, and Spain) as well as Germany and France after the implementation of the regulatory ban on outright short selling of sovereign CDS, implemented after the euro area sovereign debt crisis. Our findings show evidence, that the CDS market continues to be relevant for price discovery in euro area sovereign credit markets. However, unlike earlier studies with shorter sample periods, the bond market has been observed to incorporate information more rapidly than the CDS market for most countries in the sample. In the case of Ireland and Greece, both markets significantly contribute to the price discovery process, but the bond market in most countries exhibits faster adjustment dynamics. Our findings deviate from previous research with shorter sample periods after the introduction of the ban, which indicated CDS market leadership in price discovery for most markets. However, in our analysis, CDS leadership was observed only in Portugal and Spain, suggesting that further investigation is warranted to comprehend the evolving dynamics of the sovereign credit market. One intriguing finding concerns the Italian credit market, where the implementation of the unconventional European Central Bank (ECB) monetary policy, specifically the Quantitative Easing (QE) program in January 2015, disrupted market functioning due to excessive liquidity. Consequently, the CDS and bond yield spreads in the Italian market were no longer cointegrated during that period.04A - Beitrag SammelbandPublikation Estimating unknown arbitrage costs: evidence from a 3-regime threshold vector error correction model(Elsevier, 2020) Ters, Kristyna; Urban, JörgWe present a methodology for estimating a multivariate 3-regime threshold vector error correction model (TVECM) with an unknown cointegrating vector based on a new dynamic grid evaluation. This model is particularly useful for estimating deviations from parity conditions, such as unknown arbitrage costs in markets with a persistent non-zero basis between two similar financial market instruments traded in the spot and derivative markets. Our proposed 3-regime TVECM can estimate the area where arbitrageurs have no incentives to trade. It is only when the basis exceeds a critical threshold, that is when the potential gain from the basis trade exceeds the overall transaction costs, that we expect arbitrageurs to step in and carry out the respective trade. This leads to non-linear adjustment dynamics and regimes with different characteristics. Our methodology allows overall transaction costs to be quantified in markets where trading costs are opaque or unknown.01A - Beitrag in wissenschaftlicher ZeitschriftPublikation Intraday dynamics of credit risk contagion before and during the euro area sovereign debt crisis: Evidence from central Europe(Elsevier, 2018) Ters, Kristyna; Urban, JörgWith the onset of the euro area sovereign debt crisis, the CDS spreads of the Czech Republic, Hungary, Poland and Slovakia (the Visegrad group) increased even though the Visegrad group maintained solid public finances and ratings on average. Real economic linkages such as trade between the Visegrad group as important trading partner to the GIIPS countries might have led to this increase in sovereign credit risk due to contagion during the sovereign debt crisis period. We aim to analyse whether contagion led to higher sovereign risk in the Visegrad group and furthermore, whether the economic adjustment programmes (EAPs) by the Troika have been able to stabilise and reduce sovereign risk. We analyse 30-min intraday credit default swaps (CDS) data prior to the sovereign debt crisis period (2008–Oct. 2009) and during the sovereign debt crisis period (Oct. 2009–2011). By using a panel VAR methodology we find rather comovement effects in the Visegrad group member countries as they have been only marginally affected by the turmoil in the peripheral countries during the sovereign debt crisis. In contrast, we find strong contagion effects amongst the GIIPS countries in our sample. From an event study, we find that the EAPs have been essential for the GIIPS countries in terms of reducing contagion and sovereign risk across the euro area while the Visegrad group only reacted with a moderate reduction.01A - Beitrag in wissenschaftlicher ZeitschriftPublikation Price discovery in euro area sovereign credit markets and the ban on naked CDS(Elsevier, 2018) Gyntelberg, Jacob; Hördahl, Peter; Ters, Kristyna; Urban, JörgThe sovereign debt crisis in the euro area saw credit spreads on sovereign bonds and credit default swaps (CDS) surge for a number of member states. The rise in sovereign yields was accompanied by a significant increase in sovereign CDS market activity. This pattern raised concerns that destabilising speculation via outright short-selling of CDS (so-called ‘naked CDS’) was behind the increase in bond yields. In response, policy-makers introduced a ban on naked CDS trading. We investigate the effect of the ban on the price discovery process of sovereign credit risk, contrasting results for the post-ban period with those obtained prior to the ban. We use intraday data on sovereign CDS and bonds across a number of euro area countries. Our first main finding is that the CDS market dominates the bond market in terms of price discovery. That is, CDS premia in most cases adjust quicker to reflect new information than bond spreads. This result holds also when taking into account transaction costs. Our second main finding is that the ban on short-selling did not alter price discovery dynamics or reduce the efficiency of the market. Finally, we find that prior to the ban, CDS spreads were persistently higher than bond credit spreads, even after controlling for transaction costs. This points to the presence of market frictions that limit the ability of arbitrage forces to fully close pricing gaps between the two markets. However, these pricing discrepancies were in many cases largely eliminated following the introduction of the ban.01A - Beitrag in wissenschaftlicher Zeitschrift