Interbank money markets have been subject to substantial impairments in the recent decade, such as a decline in unsecured lending and substantial increases in haircuts on posted collateral. This paper seeks to understand the implications of these developments for the broader economy and monetary...

The first essay shows that corporate bond issuers derive value from bond underwriter relationship capital. A strong underwriter relationship enables the underwriter to credibly certify the issuer on the bond market which is fundamental for firms when issuing new debt and refinancing maturing...

Classical asset pricing theory assumes \perfect markets" which means that nancial markets are frictionless. However, in the real world nancial frictions exists. Recently the nancial literature has focused more on these frictions and on how they a ect asset prices. This thesis contributes to the...

By reinterpreting the calibration of structural models, a reassessment of the importance of the input variables is undertaken. The analysis shows that volatility is the key parameter to any calibration exercise, by several orders of magnitude. To maximize the sensitivity to volatility, a simple...

In this paper, we perform analysis of systemic risk in the financial and energy sector in Europe. In our investigation, we work with daily time series of CDS spreads. We employ factor copula model with GAS dynamics of Oh and Patton (2016) for estimation purposes of dependency structures between...

Does hedging motivate CDS trading and does that affect the availability of credit? To answer these questions we couple comprehensive bank-firm level CDS trading data from the Depository Trust and Clearing Corporation with the German credit register containing bilateral bank-firm credit...

Credit derivatives allow creditors to transfer debt cash flow rights to other market participants while retaining control rights. Theory predicts that this transfer can create empty creditors that do not fully internalize liquidation costs and liquidate borrowers excessively often. This empty...

We develop a state-space model to decompose bid and ask quotes of CDS into two components, fair default premium and liquidity premium. This approach gives a better estimate of the default premium than mid quotes, and it allows to disentangle and compare the liquidity premium earned by the...

We develop an empirical model of heterogeneous agents to study the dynamics of the European sovereign bonds market. Agents make use of different information from the CDS market and the historical price movements of the sovereign bonds for their trading decisions. Subject to the perceived risk,...

During the 2008 financial crisis, increasing risk and spillovers became a main concern for policy makers and banks. In addition, changes in sovereign and bank risk are believed to have had strong effects on world-wide exchange rates. This paper aims to analyze these dynamics empirically. We...

We provide a comprehensive analysis of the determinants of trading in the sovereign credit default swaps (CDS) market, using weekly data for single-name sovereign CDS from October 2008 to September 2015. We describe the anatomy of the sovereign CDS market, derive a law of motion for gross...

In this study, we aim to investigate the impacts of credit default swaps (CDS) premium as a risk financial indicator on the fluctuations of value of the Turkish lira against the Euro. We try to answer the following questions: Is the CDS premium change among the drivers of EUR/TL exchange rate...

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...

Creditors are increasingly transferring debt cash flow rights to other market participants while retaining control rights. We use the market for credit default swaps (CDSs) as a laboratory to show that such debt decoupling causes large adverse effects on firms whose shareholders have high...

Credit derivatives give creditors the possibility to transfer debt cash flow rights to other market participants while retaining control rights. We use the market for credit default swaps (CDSs) as a laboratory to show that the real effects of such debt unbundling crucially hinge on shareholder...

The positive relationship between bank and sovereign credit risk in the Eurozone, the so-called sovereign-bank nexus, is seen as a major threat for the stability of the Eurozone. This paper explores potential bank-level and country-level drivers of this relationship. We find that banks' home...

Market participants and policymakers alike were surprised by the large, prolonged dislocations in credit market arbitrage trades during the second half of 2015 and the first quarter of 2016. In this paper, we examine three explanations proposed by market participants: increased idiosyncratic...

Systemically important banks are connected and have dynamic dependencies of their default probabilities. An extraction of default factors from cross-sectional credit default swaps (CDS) curves allows to analyze the shape and the dynamics of the default probabilities. Extending the Dynamic Nelson...

Credit derivatives give creditors the possibility to transfer debt cash flow rights to other market participants while retaining control rights. We use the market for credit default swaps (CDSs) as a laboratory to show that the real effects of such debt unbundling crucially hinge on shareholder...