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Euro area sovereign credit risk contagion: Evidence from intraday data // Intraday credit risk responses to ECB announcements during the euro area sovereign debt crisis

Applicant Ters Kristyna
Number 158369
Funding scheme Marie Heim-Voegtlin grants
Research institution Wirtschaftswissenschaftliche Fakultät Universität Basel
Institution of higher education University of Basel - BS
Main discipline Economics
Start/End 01.07.2015 - 31.08.2018
Approved amount 374'043.00
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Keywords (7)

Panel vector autoregressive model; Spillover; ECB announcements; Sovereign credit risk; Contagion; Credit default swaps; Intraday

Lay Summary (German)

Lead
Die aktuelle Staatsschuldenkrise in der Eurozone hat dazu geführt, dass sich die Risikoaufschläge auf Staatsobligationen und Credit Default Swaps (CDS) für eine Reihe von EU-Mitgliedstaaten drastisch ausgeweitet haben. Diese Ereignisse haben das Interesse am Verständnis der Marktdynamiken dieser sogenannten "Credit Spreads" auf Staatsanleihen im Obligationen- und CDS-Markt erhöht. Diese beiden Projekte zielen darauf ab, Probleme bezüglich der Funktionalität der Märkte für das Ausfallrisiko staatlicher Kreditnehmer während der Staatsschuldenkrise zu analysieren und neue Erkenntnisse bezüglich der Marktdynamiken für die Bewertung dieser Ausfallrisiken zu liefern.
Lay summary

Das erste Projekt analysiert die Ansteckungsgefahr von Staatenkreditausfallrisiko in GIIPS-Ländern während der EU Schuldenkrise. Zusätzlich berücksichtigen wir noch Deutschland, Frankreich, die Tschechischen Republik, Polen und Ungarn in unserer Analyse um etwaige Ansteckungseffekte während der EU Schuldenkrise auf risikoarme und Zentraleuropäische Länder zu analysieren. Die bisherige empirische Forschung für Ansteckungseffekte unterscheidet zwischen "cross-country" und "intra-country" Analysen. Mittels einer Panel VAR Methode auf innertäglichen Daten für CDS und Obligationen, können wir sowohl für "cross-country" als auch für "intra-country" Effekte kontrollieren.

Das zweite Projekt untersucht, wie Interventionen der EZB (konventionelle und unkonventionelle Geldpolitik) während der EU Schuldenkrise das Staatenausfallrisiko sowie die Marktliquidität beeinflussen konnten. Mittels innertäglichen CDS und Obligationendaten für GIIPS Länder sowie Deutschland und Frankreich können wir zudem auch den Grad der Wirksamkeit dieser geldpolitischen Massnahmen untersuchen.

Direct link to Lay Summary Last update: 27.04.2015

Responsible applicant and co-applicants

Employees

Publications

Publication
Estimating unknown arbitrage costs: evidence from a three-regime threshold vector error correction model
TersKristyna (2018), Estimating unknown arbitrage costs: evidence from a three-regime threshold vector error correction model, in Bank for International Settlements Working Paper, (689), 1-41.
Arbitrage costs and the persistent non-zero CDS-bond basis: Evidence from intraday euro area sovereign debt markets
TersKristyna (2017), Arbitrage costs and the persistent non-zero CDS-bond basis: Evidence from intraday euro area sovereign debt markets, in Bank for International Settlements Working Paper, (631), 1-45.
The benefits of using large high frequency financial datasets for empirical analyses: Two applied cases
TersKristyna (2017), The benefits of using large high frequency financial datasets for empirical analyses: Two applied cases, in Statistical Implications of the new financial landscape, BaselIrving Fisher Committee on Central Bank Statistics, Basel.
Intraday dynamics of euro area sovereign credit risk contagion
Komarek Lubos, Ters Kristyna, Urban Joerg (2016), Intraday dynamics of euro area sovereign credit risk contagion, Bank for International Settlements Working Paper, Basel.
Intraday dynamics of euro area sovereign credit risk contagion
Komarek Lubos, Ters Kristyna, Urban Joerg (2016), Intraday dynamics of euro area sovereign credit risk contagion, Czech National Bank Working Paper, Prague.

Collaboration

Group / person Country
Types of collaboration
Swedish Riksbank Sweden (Europe)
- in-depth/constructive exchanges on approaches, methods or results
- Publication
Czech National Bank Czech Republic (Europe)
- in-depth/constructive exchanges on approaches, methods or results
- Publication
Bank for International Settlements Switzerland (Europe)
- in-depth/constructive exchanges on approaches, methods or results
- Publication
- Research Infrastructure

Scientific events

Active participation

Title Type of contribution Title of article or contribution Date Place Persons involved
Research Seminar Swiss National Bank Individual talk Sovereign credit risk contagion 16.09.2016 Zürich, Switzerland Ters Kristyna;
Irving Fisher Committee on Central Bank Statistics, 8th IFC Conference Talk given at a conference The benefits of using large high frequency financial datasets for empirical analyses: Two applied cases 08.09.2016 Basel, Switzerland Ters Kristyna;
European Financial Management Association Conference 2016 Talk given at a conference Limits to credit risk arbitrage: Evidence from intraday euro area sovereign debt markets 30.06.2016 Basel, Switzerland Ters Kristyna;
Research Seminar Czech National Bank Individual talk Intraday dynamics of euro area sovereign credit risk contagion 21.04.2016 Prag, Czech Republic Ters Kristyna;
Research Seminar Bank for International Settlements Individual talk Intraday dynamics of euro area sovereign credit risk contagion 04.02.2016 Basel, Switzerland Ters Kristyna;


Communication with the public

Communication Title Media Place Year
Talks/events/exhibitions FHNW Invited Panel Talk on globalisation, invited panellist German-speaking Switzerland 2017

Awards

Title Year
Research Fellow, Bank for International Settlements 2017
Fakultaetspreis fuer die beste Dissertation des akademischen Jahres 2016
Research Fellow and Research Advisor, Czech National Bank 2016
Research Fellow, Bank for International Settlements 2016

Associated projects

Number Title Start Funding scheme
146690 Intraday Dynamics of Euro-area Sovereign Credit Default Swaps (CDS) and Bonds 01.07.2013 Project funding (Div. I-III)

Abstract

1st project: Euro area sovereign credit risk contagion: Evidence from intraday dataThis project aims to analyse problems on the functionality of markets for credit risk. We will analyse sovereign risk contagion effects in PIIGS countries from October 2008 on. Further we will include Germany, France, the Czech Republic, Poland, and Hungary in our sample to analyze contagion effects from the euro area sovereign debt crisis on low-risk and central European countries. Existing research so far differentiated between cross-country and intra-country analysis. Using a Panel VAR methodology we can control for both, country-specific risk and contagion effects. Via the unique access to intraday price data for CDS and bond markets, we will be able to analyse contagion effects substantially more accurately than existing studies as no empirical work has tested the intraday patterns of sovereign credit risk contagion. Next to our contributions to academic literature, the results of this project will also contribute to the actual regulatory discussion on CDS markets which are of great relevance to central banks, politics, and financial institutions. We expect key insights as no empirical work has tested the intraday patterns of sovereign risk contagion. Using intraday CDS and bond data enables us to estimate the spread dynamics and the credit risk contagion effects substantially more accurate than existing studies on sovereign credit markets. 2nd project: Intraday credit risk responses to ECB announcements during the euro area sovereign debt crisisThis project aims to explore the pricing impacts and volatility reactions from ECB announcements on euro area sovereign credit risk on an intraday basis during the euro area sovereign debt crisis. As in Pelizzon et al. (2013), the crisis stemmed from both liquidity and credit risk concerns while as a result, sovereign credit spreads began rising sharply for a number of euro-zone peripheral countries. Furthermore, I will also include CDS and bond market liquidity in order to analyse if changes in credit risk following an ECB announcement are an important factor of liquidity dynamics. The only existing paper in this field employing intraday data is Pelizzon et al. (2013). However, their dataset is limited as it only consists of intraday Italian bond data. As I have data for both, CDS and bonds of PIIGS countries plus Germany and France, I will also be able to investigate which market reacts faster to policy decisions. This project will give key insights on the relationship between changes in sovereign credit risk (level and volatility) and liquidity following ECB monetary policy decisions.
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