We compute joint sovereign default probabilities as coincident systemic risk indicators. Instead of commonly used CDS spreads, we use government bond yield data which provide a longer data history. We show that for the more recent sample period 2008--2015, joint default probabilities based on...

We extend the Hidden Markov Model for defaults of Crowder, Davis, and Giampieri (2005) to include covariates. The covariates enhance the prediction of transition probabilities from high to low default regimes. To estimate the model, we extend the EM estimating equations to account for the time...