Abstract
In this paper, we empirically explore risk premia in mortgage covered bond markets. Using a large panel data set of covered bond asset swap spreads, we study the impact of different legal and economic environments. Conducting an in-depth analysis of this market, we find significant but small differences between countries during normal market periods. However, these differences are much stronger during times of economic crisis. Moreover, we find that developments in the real estate market are of relatively little importance during stable market periods. During economic distress, however, these have been of high importance for explaining risk premia in covered bond markets.
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