Tài liệu an analySiS of euro area Sovereign CDS anD their relation With government bonds docx

Working Pa per Serie s

An analysis of

euro area

sovereign CDS

and their

relation with

government

bonds

by Alessandro Fontana

and Martin Scheicher

no 12 / 7 1 december 2010

WORKING PAPER SERIES

NO 12 / 2010

In 2010 all ECB

publications

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taken from the

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AN ANALYSIS

OF EURO AREA SOVEREIGN CDS

AND THEIR RELATION

WITH GOVERNMENT BONDS 1

by Alessandro Fontana 2

and Martin Scheicher 3

1 This paper has been presented at the ECB and at the CREDIT 2010 Greta conference in Venice. We would like

to thank participants for helpful comments.

2 Ca’ Foscari University of Venice. Department of Economics, Fondamenta San Giobbe - Cannaregio 873,

30121 Venezia, Italy; e-mail: [email protected]

3 European Central Bank, Financial Research Division, Kaiserstrasse 29, D–60311,

Frankfurt am Main, Germany, phone: +49+69 1344 8337; fax: +49+69 1344 8552;

email: [email protected]

This paper can be downloaded without charge from http://www.ecb.europa.eu or from the Social Science

NOTE: This Working Paper should not be reported as representing

the views of the European Central Bank (ECB).

The views expressed are those of the authors

and do not necessarily reflect those of the ECB.

7 1 december

Research Network electronic library at http://ssrn.com/abstract_id=1715483.

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3

ECB

Abstract 4

Non-technical summary 5

1 Introduction 6

2 Sample 8

2.1 A brief review of sovereign CDS 8

2.2 Sample details 10

2.3 The concept of the ‘basis’ between CDS

and bonds 13

2.4 Time series of the basis measure 14

2.5 Factor analysis of the sample 15

3 Econometric analysis 15

3.1 Regression methodology 15

3.2 Overall results for spread changes 17

3.3 Further results for spread changes 18

3.4 Lead-lag analysis of bond spreads and CDS 20

3.5 Regression analysis of the basis 22

3.6 Further results for the regression analysis

of the basis 25

4 Conclusions 26

Figures and tables 28

References 45

CONTENTS

December 2010

Working Paper Series No 1271