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Are Cds spreads a good proxy of bank risk? Evidence from the recent financial crisis

Author

Listed:
  • Barbara Casu

    (Cops Business School, City University London)

  • Laura Chiaramonte

    (Università di Verona)

Abstract

The bankruptcy of Lehman Brothers in September 2008 and, shortly afterwards, the near downfall of the insurance conglomerate American International Group (Aig), both of which were heavily involved in the Cds sector, polarised attention towards the Cds activities of the major international banks. Based on a sample of internationally active banks over the period 2005 - March 2010, this paper investigates the relationship between Cds spreads and bank balance sheet ratios.The results of the empirical analysis indicate that bank Cds spreads reflect the risk captured by bank balance sheet ratios

Suggested Citation

  • Barbara Casu & Laura Chiaramonte, 2011. "Are Cds spreads a good proxy of bank risk? Evidence from the recent financial crisis," BANCARIA, Bancaria Editrice, vol. 11, pages 82-98, November.
    • Handle: RePEc:ban:bancar:v:11:y:2011:m:november:p:82-98
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    File URL: http://www.bancariaeditrice.it/prodotti/vedi/prodotto/id/2574/bancaria-n-11-2011
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    Citations

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    Cited by:

    1. Mohamed Azzim Gulamhussen & Carlos Pinheiro & Alberto Franco Pozzolo, 2012. "Were Multinational Banks Taking Excessive Risks Before the Recent Financial Crisis?," Development Working Papers 332, Centro Studi Luca d'Agliano, University of Milano, revised 16 Jul 2012.
    2. Hertrich, Markus, 2015. "Does Credit Risk Impact Liquidity Risk? Evidence from Credit Default Swap Markets," MPRA Paper 67837, University Library of Munich, Germany.
    3. Dent, Kieran & Hacıoğlu Hoke, Sinem & Panagiotopoulos, Apostolos, 2021. "Solvency and wholesale funding cost interactions at UK banks," Journal of Financial Stability, Elsevier, vol. 52(C).

    More about this item

    Keywords

    credit default swaps; indici di bilancio; rischiosità bancaria; crisi finanziaria;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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