Sovereign Credit Risk And Exchange Rates PDF Download
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| Author | : Patrick Augustin |
| Publisher | : |
| Total Pages | : 69 |
| Release | : 2018 |
| Genre | : Default (Finance) |
| ISBN | : |
Download Sovereign Credit Risk and Exchange Rates Book in PDF, ePub and Kindle
Sovereign CDS quanto spreads -- the difference between CDS premiums denominated in U.S. dollars and a foreign currency -- tell us how financial markets view the interaction between a country's likelihood of default and associated currency devaluations (the twin Ds). A no-arbitrage model applied to the term structure of quanto spreads can isolate the interaction between the twin Ds and gauge the associated risk premiums. We study countries in the Eurozone because their quanto spreads pertain to the same exchange rate and monetary policy, allowing us to link cross-sectional variation in their term structures to cross-country differences in fiscal policies. The ratio of the risk-adjusted to the true default intensities is 2, on average. Conditional on the occurrence default, the true and risk-adjusted 1-week probabilities of devaluation are 4% and 75%, respectively. The risk premium for the euro devaluation in case of default exceeds the regular currency premium by up to 0.4% per week.
| Author | : Mikhail Chernov |
| Publisher | : |
| Total Pages | : 0 |
| Release | : 2020 |
| Genre | : |
| ISBN | : |
Download Sovereign Credit and Exchange Rate Risks Book in PDF, ePub and Kindle
We study the dynamic properties of sovereign bonds in emerging markets and their associated risk premiums. We focus on the properties of credit spreads, exchange rates, and their interaction. Relying on the term structure of local currency bonds issued by Asia-Pacific sovereigns, we find that local variables are significant in the dynamics of currency and credit risk, and the components of bond risk premiums reflecting these risks. Local currency bonds dramatically improve the investment frontier.
| Author | : Claudia Foroni |
| Publisher | : |
| Total Pages | : 36 |
| Release | : 2017 |
| Genre | : Default (Finance) |
| ISBN | : |
Download Assessing the Predictive Ability of Sovereign Default Risk on Exchange Rate Returns Book in PDF, ePub and Kindle
"Increased sovereign credit risk is often associated with sharp currency movements. Therefore, expectations of the probability of a sovereign default event can convey important information regarding future movements of exchange rates. In this paper, we investigate the possible pass-through of risk in the sovereign debt markets to currency markets by proposing a new risk premium factor for predicting exchange rate returns based on sovereign default risk. We compute it from the term structure at different maturities of sovereign credit default swaps and conduct an out-of-sample forecasting exercise to test whether we can improve upon the benchmark random walk model. Our results show that the inclusion of the default risk factor improves the forecasting accuracy upon the random walk model at short forecasting horizons"--Abstract, p. ii.
| Author | : Dan Galai |
| Publisher | : International Monetary Fund |
| Total Pages | : 22 |
| Release | : 2009-05-01 |
| Genre | : Business & Economics |
| ISBN | : 1451872577 |
Download Credit Risk Spreads in Local and Foreign Currencies Book in PDF, ePub and Kindle
The paper shows how-in a Merton-type model with bankruptcy-the currency composition of debt changes the risk profile of a company raising a given amount of financing, and thus affects the cost of debt. Foreign currency borrowing is cheaper when the exchange rate is positively correlated with the return on the company's assets, even if the company is not an exporter. Prudential regulations should therefore differentiate among loans depending on the extent to which borrowers have "natural hedges" of their foreign currency exposures.
| Author | : Mr.Tamon Asonuma |
| Publisher | : International Monetary Fund |
| Total Pages | : 48 |
| Release | : 2016-02-25 |
| Genre | : Business & Economics |
| ISBN | : 1498387624 |
Download Sovereign Defaults, External Debt, and Real Exchange Rate Dynamics Book in PDF, ePub and Kindle
Emerging countries experience real exchange rate depreciations around defaults. In this paper, we examine this observed pattern empirically and through the lens of a dynamic stochastic general equilibrium model. The theoretical model explicitly incorporates bond issuances in local and foreign currencies, and endogenous determination of real exchange rate and default risk. Our quantitative analysis replicates the link between real exchange rate depreciation and default probability around defaults and moments of the real exchange rate that match the data. Prior to default, interactions of real exchange rate depreciation, originated from a sequence of low tradable goods shocks with the sovereign’s large share of foreign currency debt, trigger defaults. In post-default periods, the resulting output costs and loss of market access due to default lead to further real exchange rate depreciation.
| Author | : Philipp Hauger |
| Publisher | : GRIN Verlag |
| Total Pages | : 92 |
| Release | : 2006-10-21 |
| Genre | : Business & Economics |
| ISBN | : 3638559459 |
Download An Analysis of Transfer Risk in Comparison to Sovereign Risk Book in PDF, ePub and Kindle
Master's Thesis from the year 2006 in the subject Economics - Monetary theory and policy, grade: 1,6, Frankfurt School of Finance & Management, language: English, abstract: Transfer risk is the risk that a non-sovereign entity, which is able and willing to service its foreign currency obligations, cannot obtain the required currency or cannot transfer this money to the receiver abroad. This transfer inability is caused by the imposition of restrictions on convertibility or capital transfers by the government. Transfer risk applies to all types of international investments, especially in emerging market countries. Due to this, it is more important than ever in these days of globalization. The New Basel Capital Accords require the consideration of transfer risk, too. The author Philipp Hauger describes the different types of risk occurring in international borrowings and investments. The political and corporate determinants of transfer risk are examined. The book illustrates the reasons why monetary unions reduce the risk of a transfer event, even though they have no influence on the sovereign risk. In addition, the author details how transfer risk is assessed by international professionals and describes two interesting approaches to estimate transfer risk in a quantitative way. This book is intended for professionals and students who are interested in the risks of international investments and for everybody working in international business, who has to differentiate between sovereign risk and the risk of a corporate default.
| Author | : Mr.Giovanni Dell'Ariccia |
| Publisher | : International Monetary Fund |
| Total Pages | : 54 |
| Release | : 2018-09-07 |
| Genre | : Business & Economics |
| ISBN | : 1484359623 |
Download Managing the Sovereign-Bank Nexus Book in PDF, ePub and Kindle
This paper reviews empirical and theoretical work on the links between banks and their governments (the bank-sovereign nexus). How significant is this nexus? What do we know about it? To what extent is it a source of concern? What is the role of policy intervention? The paper concludes with a review of recent policy proposals.
| Author | : Shelagh Heffernan |
| Publisher | : Routledge |
| Total Pages | : 202 |
| Release | : 2012 |
| Genre | : Business & Economics |
| ISBN | : 0415538556 |
Download Sovereign Risk Analysis Book in PDF, ePub and Kindle
Directed both at students of international finance and practitioners in the field, the book stresses the importance of treating the analysis of sovereign risk in a more general framework than is typically the case, identifying the components of both the demand and supply of sovereign loans. The author also discusses the link between the unique aspects of sovereign lending, the interdependence of the international banking system and the potential instability in the world financial system.
| Author | : Mr.D. F. I. Folkerts-Landau |
| Publisher | : International Monetary Fund |
| Total Pages | : 54 |
| Release | : 1997-12-01 |
| Genre | : Business & Economics |
| ISBN | : 1451979614 |
Download Risk Management of Sovereign Assets and Liabilities Book in PDF, ePub and Kindle
In an environment of sizable and volatile capital flows and integrated international capital markets, large and unhedged net external sovereign liabilities expose countries to swings in international asset prices and to potential speculative currency attacks. The paper argues that an essential step in reducing emerging market vulnerability to such external shocks is to reform the institutional arrangements governing asset and liability management policies, so as to promote a transparent, publicly accountable, and professional incentive structure.
| Author | : Mr.Emre Alper |
| Publisher | : International Monetary Fund |
| Total Pages | : 27 |
| Release | : 2012-01-01 |
| Genre | : Business & Economics |
| ISBN | : 1463931867 |
Download Pricing of Sovereign Credit Risk Book in PDF, ePub and Kindle
We investigate the pricing of sovereign credit risk over the period 2008-2010 for selected advanced economies by examining two widely-used indicators: sovereign credit default swap (CDS) and relative asset swap (RAS) spreads. Cointegration analysis suggests the existence of an imperfect market arbitrage relationship between the cash (RAS) and the derivatives (CDS) markets, with price discovery taking place in the latter. Likewise, panel regressions aimed at uncovering the fundamental drivers of the two indicators show that the CDS market, although less liquid, has provided a better signal for sovereign credit risk during the period of the recent financial crisis.
