IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Measuring Systematic Risk in EMU Government Yield Spreads

Listed author(s):
  • Alois Geyer
  • Stephan Kossmeier
  • Stefan Pichler
Registered author(s):

    This paper focuses on the joint dynamics of yield spreads derived from government bonds issued by member states of the European Monetary Union (EMU). A descriptive analysis shows that there are substantial and volatile spreads between zero coupon yields of EMU member countries and German Bund yields. These yield spreads form an important source of additional risk that has to be taken into account by any pricing or risk management model dealing with EMU government bonds. We extract risk factors driving observed yield spreads by employing a multi-issuer version of the model originally proposed by Duffie and Singleton (1999). We adopt a state-space approach to implement the model whereby we can extract factor series and model parameters simultaneously. Our findings indicate that a parsimonious two-factor version of the multi-issuer model sufficiently captures the main features of the data. In this model the first factor turns out to be related to long term yield spreads across different issuers, whereas the second factor is related to short term yield spreads. Our evidence suggests that EMU government bond spreads are related to corporate bond spreads and swap spreads whereas we do not find evidence for a significant impact of macroeconomic or liquidity related variables.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Springer in its journal European Finance Review.

    Volume (Year): 8 (2004)
    Issue (Month): 2 ()
    Pages: 171-197

    in new window

    Handle: RePEc:kap:eurfin:v:8:y:2004:i:2:p:171-197
    Contact details of provider: Web page:

    Order Information: Web:

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:kap:eurfin:v:8:y:2004:i:2:p:171-197. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)

    or (Rebekah McClure)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.