A market-based approach to sector risk determinants and transmission in the euro area

► Analysis of determinants and diffusion of risk across corporate sectors in the euro area. ► Econometric approach accounts for cross-section dependence over time due to common observed and unobserved factors. ► Sectoral risk comprises a stationary idiosyncratic component and a non-stationary common factor. ► Sector-specific risk drivers and proximity-driven risk spill-over matter more than macroeconomic and financial risk drivers.