This paper investigates the role of countries' environmental, social and governance (ESG) performance in sovereign CDS markets. Based on data for 60 countries from 2007 to 2017, we find that with superior ESG show (i) lower credit default swap (CDS) spreads (ii) flatter implied curves. implies a risk mitigation effect which is even more pronounced long term than short term. These results remain...

Credit risk is quantified by the loss distribution due to unexpected changes in the credit quality of the counterparty in a financial contract. Default correlation risk refers to the risk that a bundle of risky obligors may default together. To understand the clustering phenomena in correlated defaults, we consider credit contagion models which describe the propagation of financial distress fro...