We characterize asset return linkages during periods of stress by an extremal dependence measure. Contrary to correlation analysis, this nonparametric measure is not predisposed toward the normal distribution and can allow for nonlinear relationships. Our estimates for the G-5 countries suggest...

This paper investigates banking and sovereign distress in the Eurozone and the importance of direct and indirect financial exposures. We use BIS cross-border banking claims to link member states in a GVAR framework and jointly model sectoral CDS premia. Based on balance sheet positions of an...

The potential mutation of the Sub-Prime banking crisis into a sovereign debt one in Euro area countries is investigated. After reviewing the criteria used to measure the debt vulnerability, the balance sheet approach (BSA) is presented in order to illustrate the potential connections between...