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Sovereign Credit And Exchange Rate Risks
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Book Synopsis Sovereign Credit and Exchange Rate Risks by : Mikhail Chernov
Download or read book Sovereign Credit and Exchange Rate Risks written by Mikhail Chernov and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis An Analysis of Transfer Risk in Comparison to Sovereign Risk by : Philipp Hauger
Download or read book An Analysis of Transfer Risk in Comparison to Sovereign Risk written by Philipp Hauger and published by GRIN Verlag. This book was released on 2006-10-21 with total page 92 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Sovereign Defaults, External Debt, and Real Exchange Rate Dynamics by : Mr.Tamon Asonuma
Download or read book Sovereign Defaults, External Debt, and Real Exchange Rate Dynamics written by Mr.Tamon Asonuma and published by International Monetary Fund. This book was released on 2016-02-25 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Sovereign Credit Risk and Exchange Rates by : Patrick Augustin
Download or read book Sovereign Credit Risk and Exchange Rates written by Patrick Augustin and published by . This book was released on 2018 with total page 69 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Sovereign Risk Analysis by : Shelagh Heffernan
Download or read book Sovereign Risk Analysis written by Shelagh Heffernan and published by Routledge. This book was released on 2012 with total page 202 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Managing the Sovereign-Bank Nexus by : Mr.Giovanni Dell'Ariccia
Download or read book Managing the Sovereign-Bank Nexus written by Mr.Giovanni Dell'Ariccia and published by International Monetary Fund. This book was released on 2018-09-07 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Risk Management of Sovereign Assets and Liabilities by : Mr.D. F. I. Folkerts-Landau
Download or read book Risk Management of Sovereign Assets and Liabilities written by Mr.D. F. I. Folkerts-Landau and published by International Monetary Fund. This book was released on 1997-12-01 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Credit Risk Spreads in Local and Foreign Currencies by : Dan Galai
Download or read book Credit Risk Spreads in Local and Foreign Currencies written by Dan Galai and published by International Monetary Fund. This book was released on 2009-05-01 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Assessing the Predictive Ability of Sovereign Default Risk on Exchange Rate Returns by : Claudia Foroni
Download or read book Assessing the Predictive Ability of Sovereign Default Risk on Exchange Rate Returns written by Claudia Foroni and published by . This book was released on 2017 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: "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.
Book Synopsis A Primer on Managing Sovereign Debt-Portfolio Risks by : Thordur Jonasson
Download or read book A Primer on Managing Sovereign Debt-Portfolio Risks written by Thordur Jonasson and published by International Monetary Fund. This book was released on 2018-04-06 with total page 133 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides an overview of sovereign debt portfolio risks and discusses various liability management operations (LMOs) and instruments used by public debt managers to mitigate these risks. Debt management strategies analyzed in the context of helping reach debt portfolio targets and attain desired portfolio structures. Also, the paper outlines how LMOs could be integrated into a debt management strategy and serve as policy tools to reduce potential debt portfolio vulnerabilities. Further, the paper presents operational issues faced by debt managers, including the need to develop a risk management framework, interactions of debt management with fiscal policy, monetary policy, and financial stability, as well as efficient government bond markets.
Book Synopsis Policy Credibility and Sovereign Credit by : Mr.David Hauner
Download or read book Policy Credibility and Sovereign Credit written by Mr.David Hauner and published by International Monetary Fund. This book was released on 2007-01-01 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: References to policy credibility, particularly with regard to fiscal policy, are ubiquitous in both economic literature and financial markets, even though it is not directly observable. The case of the EU new member states (NMS)-emerging markets joining a supranational entity that is generally considered to have higher policy credibility-provides a unique experiment to assess the effects of credibility on sovereign credit. This paper examines the impact of EU accession on three key variables that can reflect in varying degrees policy credibility: sovereign ratings, foreign currency spreads, and local currency yields. The results suggest that the NMS appear to have enjoyed higher credibility compared to their peers.
Book Synopsis Sovereign Risk and Financial Crises by : Michael Frenkel
Download or read book Sovereign Risk and Financial Crises written by Michael Frenkel and published by Springer Science & Business Media. This book was released on 2013-03-14 with total page 263 pages. Available in PDF, EPUB and Kindle. Book excerpt: Sovereign risk and financial crises play a key role in current international economic developments, particularly in the case of economic downturns. As the Asian economic crisis in the late 1990s revealed once again, financial crises are the rule rather than the exception in capitalist economies. The event also revealed that international public debt agreements are contingent claims. In a world of increasing economic interdependencies, the issues of financial crises and country defaults are of critical importance. This volume goes to the heart of the academic discussion on sovereign risk and financial crises by centering on quantitative-empirical aspects, evaluating prominent approaches, and by proposing new methods. Part I of the volume identifies key factors and processes that are central in analyzing sovereign risk while Part II focuses on the determinants and effects of financial crises.
Book Synopsis This Time Is Different by : Carmen M. Reinhart
Download or read book This Time Is Different written by Carmen M. Reinhart and published by Princeton University Press. This book was released on 2011-08-07 with total page 513 pages. Available in PDF, EPUB and Kindle. Book excerpt: An empirical investigation of financial crises during the last 800 years.
Book Synopsis Exchange Rate Risk and Local Currency Sovereign Bond Yields in Emerging Markets by : Blaise Gadanecz
Download or read book Exchange Rate Risk and Local Currency Sovereign Bond Yields in Emerging Markets written by Blaise Gadanecz and published by . This book was released on 2014 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Exchange Rate Dynamics and United States Dollar-Denominated Sovereign Bond Prices in Emerging Markets by : Cho-Hoi Hui
Download or read book Exchange Rate Dynamics and United States Dollar-Denominated Sovereign Bond Prices in Emerging Markets written by Cho-Hoi Hui and published by . This book was released on 2018 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: The study conducts an empirical test on dollar-denominated sovereign credit spreads in emerging markets, including Brazil, Colombia, Mexico, the Philippines, the Russian Federation, and Turkey to examine their relationship with each country's exchange rate and the United States (US) Treasury yields. The relationship between each country's exchange rate and the pricing of each country's US-dollar denominated sovereign bonds was particularly strong after the global financial crisis of 2008-2009. A two-factor pricing model is developed with closed-form solutions for the sovereign bonds. The correlated factors in the model are foreign exchange rates and US risk-free interest rates that follow a double square-root process relevant in a low interest rate environment. The numerical results and associated error analysis show that the model credit spreads can broadly track market credit spreads.
Book Synopsis Global Waves of Debt by : M. Ayhan Kose
Download or read book Global Waves of Debt written by M. Ayhan Kose and published by World Bank Publications. This book was released on 2021-03-03 with total page 403 pages. Available in PDF, EPUB and Kindle. Book excerpt: The global economy has experienced four waves of rapid debt accumulation over the past 50 years. The first three debt waves ended with financial crises in many emerging market and developing economies. During the current wave, which started in 2010, the increase in debt in these economies has already been larger, faster, and broader-based than in the previous three waves. Current low interest rates mitigate some of the risks associated with high debt. However, emerging market and developing economies are also confronted by weak growth prospects, mounting vulnerabilities, and elevated global risks. A menu of policy options is available to reduce the likelihood that the current debt wave will end in crisis and, if crises do take place, will alleviate their impact.
Book Synopsis ASEAN+3 Bond Market Guide by : Asian Development Bank
Download or read book ASEAN+3 Bond Market Guide written by Asian Development Bank and published by Asian Development Bank. This book was released on 2012-01-01 with total page 1485 pages. Available in PDF, EPUB and Kindle. Book excerpt: This report contains the comprehensive reports of the ASEAN+3 Bond Market Forum Sub-Forum 1 (SF1) and Sub-Forum 2 (SF2). The SF1 report (Volume 1) analyzes the harmonization and standardization of the existing bond markets in the ASEAN+3. It also contains the individual market guides of 11 economies under the ASEAN+3 Bond Market Forum (ABMF). The SF2 report (Volume 2) provides an overview of the ASEAN+3 bond markets and their infrastructures, as well as issues confronted by each bond market in the region. It also presents bond-market infrastructure diagrams, domestic bond transaction flows, and cross-border bond transaction flows, which can help the reader to visually navigate the existing bond market infrastructures in the region. The report is the product of the collaborative efforts of the National Members and Experts and International Experts of the ABMF in cooperation with the Asian Development Bank's Office of Regional Economic Integration.
