A Study On The European Sovervign Debt Risk Based On The CCA Method

Affected by global financial crisis, the European sovereign risk surged, and theEuropean sovereign debt crisis has become an important factor to global financialstability. As the factors of sovereign debt risk are complex, and some leading factorsare impossible to quantitative analysis, it has become an important research topicfor financial regulatory authorities and international investors.This paper used contingent claim analysis model to construct a sovereignbalance sheet, in order to form a uniform standard to measure sovereign risk. Thispaper reviewed the interpretation of contingent claim analysis method for debt riskpricing, which leads to the theoretical basis of this paper.According to the evolution process of European sovereign debt crisis, thisarticle analyzed the causes of European sovereign debt crisis from the aspect ofeconomic structure, social structure, the EU financial internal correlation.Dislike the traditional sovereign risk analysis methods of usingmacroeconomic indicators, political risk and the current account factors, this articlerevise the corporate debt risk model to construct sovereign balance sheet. In orderto measure the model and the accuracy and practical value of sovereign debt risksindicator, this article made research on the correlation of the credit spreads indicatorand CDS data from the market.Finally, combined with the previous sovereign debt crisis solution, this articlelaunched a path of resolving the euro zone sovereign debt crisis. Based on the empirical research, this article offered a strategy choice for international financialinstitutions and international investors.