Default risk premium in credit and equity markets
(Jointly with Gianluca Fusai)
The default risk premium expresses the difference between the actual default risk of a company and the default risk implied by the securities issued by the company. In this paper, we study the simultaneous relationship between the dynamics of the default risk premium and both the dynamics of the stock price and the CDS (Credit Default Swap) spread of a company. We show that an increase in the default...
The Relative Pricing of Sovereign Credit Risk After the Eurozone Crisis
(Jointly with Francesco Ruggiero)
The paper investigates the relative pricing of the sovereign credit risk, for European countries, during and after the sovereign debt crisis of 2010-2012. We investigate empirically the theoretical relationship between CDS spreads and bond yields before and after the announcement of the Outright Monetary Transaction (OMT) Programme, by the European Central Bank, and we show that the relative mispricing of the sovereign...