An analysis of euro area sovereign CDS and their relation with government bonds
比较欧元区政府债券与CDS的定价，分析基差偏离的驱动因素，发现卖空摩擦和融资摩擦分别解释正负基差，而债券市场的避险/流动性现象推高了高评级国家的正基差。
We compare the market pricing of euro area government bonds and the corresponding Credit Default Swaps (CDSs). In particular, we analyse the “basis” defined as the difference between the premium on the CDS and the credit spread on the underlying bond. Our sample of weekly data covers the period from January 2007 to December 2012 and contains several episodes of sovereign market distress. Overall, we observe a complex relationship between the derivatives market and the underlying cash market characterised by sizable deviations from the no-arbitrage relationship (i.e. basis equal to zero). We show that short-selling frictions explain the persistence of positive basis deviations while funding frictions explain the persistence of negative basis deviations which are observed for countries with weak public finances. Moreover, we show that the “flight-to-quality/liquidity” phenomenon in bond markets is a key driver of the large positive basis of better rated countries.