communication: Synthetic and cash sovereign credit market: heading towards a unified European framework
speaker: Tommaso Colozzaabstract: This paper investigates the price formation of credit risk premia across European sovereign countries. A metric of such premia is retrieved under the statistical measure using bootstrap techniques on hedging portfolios. This latter is retreived in the cash-synthetic market by means of comparison to standard credit spreads visàvis Germany. Price discovery is then analyzed in a VECM setting by means of lead-lag analysis. Discrepancies between the two credit metrics induces the CDS-bond basis, here defined as the spread of a benchmark rate on target hedged position. The basis is explained across a panel of four core and four non-core countries using idiosyncratic and common regressors. The retrieved unobserved fixed effects are then used as a metric for liquidity premia.
timetable:
Fri 29 Jan, 11:00 - 13:00, Sala Stemmi
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