Bundesbank paper quantifies ‘considerable’ risk spillovers
A discussion paper, published by the Deutsche Bundesbank on January 28, seeks to quantify the extent of credit risk spillovers, finding this differs between institutions and regions.
Sebastian Keiler and Armin Eder, the paper's authors, base their model on credit default swap (CDS) spreads, decomposing the figures into systemic, systematic and idiosyncratic risks. They find that in some cases more than 20% of the change in CDS spreads is due to fears of "financial infection".
The authors find
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