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The Management of Greek Sovereign Risk

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  • OLDANI, CHIARA

Abstract

In 2010 the excessive public spending produced the first sovereign bond market crisis in Europe: Greece. The Hellenic crisis is the product of years of recession, of the sluggish economic environment and poor productivity – but above all it is the product of the mismanagement of the public finance, of unsatisfactory reporting, risk management and accounting practices. Information about Greece is scarce and fragmented, but the inability by European authorities to understand the incredible mismanagement strongly disappoints the taxpayer. The relevant exposure of European banks in the bond market toward the default risk of Greece supports the need for hedging tools, such as Credit Default Swaps. However, there is evidence that the CDS market on Greek sovereign bonds is segmented, and contracts are mis-priced. The lack of comprehensive data on CDS and other OTC contracts impedes any further investigation. European authorities should consider revising CDSs trading rules and requirements, until the risks produced are properly limited

Suggested Citation

  • Oldani, Chiara, 2011. "The Management of Greek Sovereign Risk," MPRA Paper 36195, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:36195
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    File URL: https://mpra.ub.uni-muenchen.de/36195/1/MPRA_paper_36195.pdf
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    References listed on IDEAS

    as
    1. Ericsson, Jan & Jacobs, Kris & Oviedo, Rodolfo, 2009. "The Determinants of Credit Default Swap Premia," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 44(01), pages 109-132, February.
    2. Oldani, Chiara & Savona, Paolo, 2005. "Derivatives, Fiscal Policy and Financial Stability," MPRA Paper 36199, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Greek crisis; Credit Default Swap; sovereign risk management;

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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