Sovereign credit risk, liquidity, and European Central Bank intervention: Deus ex machina?

Loriana Pelizzon, Marti G. Subrahmanyam, Davide Tomio, Jun Uno

研究成果: Article › 査読

30 被引用数 (Scopus)

抄録

We examine the dynamic relation between credit risk and liquidity in the Italian sovereign bond market during the eurozone crisis and the subsequent European Central Bank (ECB) interventions. Credit risk drives the liquidity of the market. A 10% change in the credit default swap (CDS) spread leads to a 13% change in the bid-ask spread, the relation being stronger when the CDS spread exceeds 500 basis points. The Long-Term Refinancing Operations of the ECB weakened the sensitivity of market makers’ liquidity provision to credit risk, highlighting the importance of funding liquidity measures as determinants of market liquidity.

本文言語English
ページ（範囲）86-115
ページ数30
ジャーナルJournal of Financial Economics
巻122
号1
DOI
出版ステータスPublished - 2016 10 1

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management

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