Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/239238 
Year of Publication: 
2020
Citation: 
[Journal:] Journal of Risk and Financial Management [ISSN:] 1911-8074 [Volume:] 13 [Issue:] 7 [Publisher:] MDPI [Place:] Basel [Year:] 2020 [Pages:] 1-17
Publisher: 
MDPI, Basel
Abstract: 
The recent financial crisis offered an interesting opportunity to analyze the markets'; behavior in a high-volatility framework. In this paper, we analyzed the price discovery process of the Italian banks' Credit Default Swap (CDS) spreads through the Merton model, extended with the inclusion of a redenomination risk proxy, as to say, the risk that Italy could leave the eurozone. This paper contributes to the literature by integrating the classic Merton model with a political-sensitive market variable able to explain the greatest variance in the Italian banks'; CDS spreads during the most relevant and commonly recognized periods of socio-political and financial distress. Results show that the redenomination risk is progressively becoming the main driver of the process during crises, in particular for the sovereign debt crisis and in 2018.
Subjects: 
CDS spreads
Granger-causality
quanto CDS
redenomination risk
JEL: 
G01
G12
G14
G20
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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