Spillover from Italian Political Risk to the Italian and the Euro Area Banking Sector
Abstract
We examine if the political risk from the 2018 Italian election has caused a
spillover effect from Italian sovereign risk to the banking sector within Italy and
the Euro Area. We apply a panel regression to find evidence of correlation
between CDS spread of Italian sovereign CDS and Euro Area banks CDS spreads.
We find that there is a strong spillover from the Italian sovereign CDS to both the
Italian and the Euro Area banks CDS spread. We conclude that the spillover has
financially and statistically affected the banking sector in Italy and in the Euro
Area negatively.
Description
Masteroppgave(MSc) in Master of Science in Finance - Handelshøyskolen BI, 2019