The correlation between risks since 2009

- "Since 2009, there has been a correlation between four types of risks:
• sovereign risk;
• banking risk;
• corporate credit risk (default risk);
• currency risk."
- "The sovereign risk and the banking risk are correlated (in Europe and Japan) because of the massive holding of government securities by banks and the appearance of sovereign risk due to the fiscal deficits linked to the crisis."
- "The credit risk and the banking risk are normally correlated, because of the banks’ portfolios of corporate loans; the corporate credit risk and sovereign risk are correlated since, if there is a public debt crisis in a country, there is either a very rapid reduction in the fiscal deficit, or a default, and in both cases a fall in gross domestic product."
- "Lastly, the currency risk is correlated to other risks because of the dollar’s safe haven role: concern about European countries, banks and companies leads to an appreciation of the dollar. The "stress-test" has become global, since all risks unfold simultaneously."
Natixis Flash Economics 353 20100708

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