Rating Agencies vs. Sovereign Debt Markets: A Tale of Interacting Risk Preferences

George Christodoulakis

Chapter 4 in Managing Risks in the European Periphery Debt Crisis, 2015, pp 78-86 from Palgrave Macmillan

Abstract: Abstract In the aftermath of sub-prime crisis in the USA, investors witnessed a much closer scrutiny of the European periphery debt securities by the markets, which intensified during 2009 and dramatically escalated over the subsequent two years. An important dimension of such an escalation concerns the interaction between different market segments and its possible attribution to either objective parameters or behavioural characteristics such as the relative preferences of the markets towards risk. The markets assess and price the riskiness of sovereign debt primarily through two sources of information: first, market prices for traded sovereign bonds and credit default swaps (CDS) and second, credit ratings published by agencies (CRA) such as Standard & Poor’s (S&P), Moody’s and Fitch.

Keywords: Euro Area; Credit Default Swap; Bond Market; Debt Crisis; Sovereign Debt (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-137-30495-7_4

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DOI: 10.1057/9781137304957_4

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