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The transmission of default risk between banks and countries based on CAViaR models

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  • Peng, Wei

Abstract

This study investigates the relationship between country and bank credit default swap spreads by employing CAViaR models proposed by White et al.. By choosing a sample of six major European economies, we find that the bank default risk plays an important role in determining the country default risk in the Netherlands and Germany. By illustrating the time-varying VaRs, we find that the VaRs in these countries are significant from 2010 onward, showing a greater exposure to common shocks during the European debt crisis. Our results would be useful for investors and monetary authorities.

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  • Peng, Wei, 2021. "The transmission of default risk between banks and countries based on CAViaR models," International Review of Economics & Finance, Elsevier, vol. 72(C), pages 500-509.
    • Handle: RePEc:eee:reveco:v:72:y:2021:i:c:p:500-509
    DOI: 10.1016/j.iref.2020.11.011
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    References listed on IDEAS

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