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Sovereign Default and Bank CDS Payments in Europe

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  • Guillaume Vuillemey

Abstract

This paper investigates the redistributive effects of CDS payments in case of a sovereign credit event in Europe. A large number of default scenarios are simulated using bank-level data on European banks? bond and CDS portfolios and the theoretical framework put forth by Vuillemey and Peltonen [2013]. I estimate a probit model to document the determinants of the redistributivity of bank-to-bank CDS payments, according to four criteria. There is no evidence of massive redistributive effects. However, a set of bank-level and country-level characteristics drive the observed payment patterns to a significant extent. Additional results concern the relative magnitude of bank losses on their bond and CDS portfolios.

Suggested Citation

  • Guillaume Vuillemey, 2014. "Sovereign Default and Bank CDS Payments in Europe," Revue d'économie politique, Dalloz, vol. 124(6), pages 927-952.
    • Handle: RePEc:cai:repdal:redp_246_0927
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