The rise in the likelihood of a disorderly dissolution (“crash”) of the Parliament , that I estimate to have risen from 0.52 to 0.65 since Friday last week following PdL ministers and MPs threat of resignations, is already affecting the BTP-Bund spread (today the spread opened around 290bp). If we assume that probability of an Italian default rises proportionately, e.g. by 25%, (this is an upper-bound) a simple arbitrage condition implies that the spread should increase by up to 66bp (from 265 on Friday to 3.31) in the next few days.
Related Posts
HELLO!

I'm
Paolo Manasse
Professor of Economics
Economics Department, University of Bologna
Download Resume or Read my Resume
Articoli recenti
Recent Tweets
-
HcGoldman Sachs mostra gli errori di Lagarde che secondo Draghi hanno portato l’eurozona “sull’orlo del precipitwitter.com/i/web/status/1…cHBdqG25dl
-
@matteosalvinimi Mandando i medici pensionati da quota 100 ?
-
New #lockdown : come (non) chiudere l'economia paolomanasse.it/2020/10/nuovo-… @ilfoglio_it @OGiannino @Phastidioâ€twitter.com/i/web/status/1…A6
-
@PiazzapulitaLA7 staserà il dr@azangrilloo sta dimostrando di non avere alcuna familiarità con metodo scientifico , brav@mariocalabresisi
-
@brusco_sandro Ho ghignato come un pazzo