Sovereign bonds lost safe haven status in crisis: Bundesbank
A Bundesbank paper published on Friday looks at the spread between eurozone sovereign bonds and German bunds, and markets' perceptions of default probabilities during the recent financial crisis.
The authors, Niko Dötz and Christoph Fischer, present a new approach to analysing the recent development of EMU sovereign bond spreads. Using a GARCH-in-mean model, Dötz and Fischer look at time-varying default probabilities, derived by decomposing the spreads into a risk premium, an expected loss
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