This paper proposes a new framework for the analysis of public sector debt sustainability. The framework uses concepts and methods from modern practice of contingent claims to develop a quantitative risk-based model of sovereign credit risk. The motivation in developing this framework is to...

The complex spillover effects between sectors observed during the global financial crisis and recent European crisis make clear the importance of improving our understanding of the interactions and feedback mechanisms between sovereign and banking-sector risks. To that end, this paper presents a...