We show that credit risk accounts for only a small fraction of yield spreads for investment-
grade bonds of all maturities, with the fraction lower for bonds of shorter maturities, and that …

This paper reviews the young but rapidly growing literature on sovereign credit default swap
premia. A discussion of current debates in the academic and popular press hopefully raises …

Credit default swaps (CDS) have been growing in importance in the global financial
markets. However, their role has been hotly debated, in industry and academia, particularly …

In the context of the European crisis, we show that the security portfolio of banks plays an
important role in the propagation of financial shocks across countries. Using Italian loan …

We propose an empirical framework to assess the likelihood of joint and conditional
sovereign default from observed CDS prices. Our model is based on a dynamic skewed-t …

We provide a synthesis of the empirical evidence on market liquidity. The liquidity
measurement literature has established standard measures of liquidity that apply to broad …

We provide new empirical evidence that US expected growth and consumption volatility are
closely related to the strong comovement in sovereign spreads. We rationalize these …

The Lehman bankruptcy highlights the potential for interconnectedness to cause negative
externalities through counterparty contagion, but the externalities may also arise from …

Reduced-form models of default that attribute a large fraction of credit spreads to
compensation for credit-event risk typically preclude the most plausible economic …

We use a network model of credit risk to measure market expectations of the potential
spillovers from a sovereign default. Specifically, we develop an empirical model, based on …