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Default probabilities of European sovereign debt: market-based estimates

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  • Laurence Copeland
  • Sally-Anne Jones

Abstract

For a number of EMU member Governments, prices of their (mainly) DM-denominated debt are compared with otherwise identical debt issued by the German Government, so as to extract implied risk-neutral default probabilities. In most cases, the probabilities are small, though in the case of Italy they average over 4% even under the most conservative assumptions.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics Letters.

Volume (Year): 8 (2001)
Issue (Month): 5 ()
Pages: 321-324

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Handle: RePEc:taf:apeclt:v:8:y:2001:i:5:p:321-324

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Cited by:
  1. Su-Lien Lu & Chau-Jung Kuo, 2005. "How to gauge the credit risk of guarantee issues in a Taiwanese bills finance company: an empirical investigation using a market-based approach," Applied Financial Economics, Taylor & Francis Journals, vol. 15(16), pages 1153-1164.
  2. Bernoth, Kerstin & von Hagen, Jürgen & Schuknecht, Ludger, 2012. "Sovereign risk premiums in the European government bond market," Journal of International Money and Finance, Elsevier, vol. 31(5), pages 975-995.
  3. Bernoth, Kerstin & von Hagen, Jürgen & Schuknecht, Ludger, 2004. "Sovereign risk premia in the European government bond market," Working Paper Series 0369, European Central Bank.
  4. Petr Hedbávný & Ondrej Schneider & Jan Zápal, 2005. "A Fiscal Rule that has Teeth: A Suggestion for a ‘Fiscal Sustainability Council’ underpinned by the Financial Markets," CESifo Working Paper Series 1499, CESifo Group Munich.
  5. Salvador Barrios & Per Iversen & Magdalena Lewandowska & Ralph Setzer, 2009. "Determinants of intra-euro area government bond spreads during the financial crisis," European Economy - Economic Papers 388, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  6. Anna Iara & Guntram B. Wolff, 2011. "Rules and risk in the euro area," Working Papers 615, Bruegel.
  7. Alexander Schulz & Guntram B. Wolff, 2009. "The German Sub-national Government Bond Market: Structure, Determinants of Yield Spreads and Berlin's Forgone Bail-out," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 229(1), pages 61-83, February.
  8. Schuknecht, Ludger & von Hagen, Jürgen & Wolswijk, Guido, 2007. "Government Risk Premiums in the Bond Market: EMU and Canada," CEPR Discussion Papers 6579, C.E.P.R. Discussion Papers.
  9. Lizarazo, Sandra Valentina, 2013. "Default risk and risk averse international investors," Journal of International Economics, Elsevier, vol. 89(2), pages 317-330.
  10. Oshiro, Naoto & Saruwatari, Yasufumi, 2005. "Quantification of sovereign risk: Using the information in equity market prices," Emerging Markets Review, Elsevier, vol. 6(4), pages 346-362, December.
  11. Radovan Vadovic, 2009. "Early, Late, and Multiple Bidding in Internet Auctions," Working Papers 0904, Centro de Investigacion Economica, ITAM.

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