Sovereign Credit Risk And Exchange Rates
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Sovereign Credit Risk And Exchange Rates
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Author : Patrick Augustin
language : en
Publisher:
Release Date : 2018
Sovereign Credit Risk And Exchange Rates written by Patrick Augustin and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with Default (Finance) categories.
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.
Sovereign Credit And Exchange Rate Risks
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Author : Mikhail Chernov
language : en
Publisher:
Release Date : 2020
Sovereign Credit And Exchange Rate Risks written by Mikhail Chernov and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020 with categories.
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.
An Analysis Of Transfer Risk In Comparison To Sovereign Risk
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Author : Philipp Hauger
language : en
Publisher: GRIN Verlag
Release Date : 2006-10-21
An Analysis Of Transfer Risk In Comparison To Sovereign Risk written by Philipp Hauger and has been published by GRIN Verlag this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006-10-21 with Business & Economics categories.
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.
Credit Risk Spreads In Local And Foreign Currencies
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Author : Dan Galai
language : en
Publisher: International Monetary Fund
Release Date : 2009-05-01
Credit Risk Spreads In Local And Foreign Currencies written by Dan Galai and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009-05-01 with Business & Economics categories.
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.
Sovereign Assets And Liabilities Management
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Author : Mr.D. F. I. Folkerts-Landau
language : en
Publisher: International Monetary Fund
Release Date : 2000-07-05
Sovereign Assets And Liabilities Management written by Mr.D. F. I. Folkerts-Landau and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2000-07-05 with Business & Economics categories.
This volume, edited by David Folkerts-Landau and Marcel Cassard, consists of papers presented at a conference held in Hong Kong SAR that was hosted by the IMF and the Hong Kong Monetary Authority. It focuses on a wide range of issues confronting policymakers in managing their sovereign assets and liabilities in a world of mobile capital and integrated capital markets. Topics include public debt management strategy, central bank reserves management, technical and quantitive aspects of risk management, and credit costs and borrowing capacity in optimizing debt management. The papers draw on experiences of policymakers and private sector participants actively involved in formulating and implementing debt and reserves policy.
Assessing The Predictive Ability Of Sovereign Default Risk On Exchange Rate Returns
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Author : Claudia Foroni
language : en
Publisher:
Release Date : 2017
Assessing The Predictive Ability Of Sovereign Default Risk On Exchange Rate Returns written by Claudia Foroni and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with Default (Finance) categories.
"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.
Risk Management Of Sovereign Assets And Liabilities
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Author : Mr.D. F. I. Folkerts-Landau
language : en
Publisher: International Monetary Fund
Release Date : 1997-12-01
Risk Management Of Sovereign Assets And Liabilities written by Mr.D. F. I. Folkerts-Landau and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1997-12-01 with Business & Economics categories.
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.
Sovereign Defaults External Debt And Real Exchange Rate Dynamics
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Author : Mr.Tamon Asonuma
language : en
Publisher: International Monetary Fund
Release Date : 2016-02-25
Sovereign Defaults External Debt And Real Exchange Rate Dynamics written by Mr.Tamon Asonuma and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016-02-25 with Business & Economics categories.
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.
Testing The Credibility Of Belgium S Exchange Rate Policy
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Author : Mr.Ioannis Halikias
language : en
Publisher: International Monetary Fund
Release Date : 1993-10-01
Testing The Credibility Of Belgium S Exchange Rate Policy written by Mr.Ioannis Halikias and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1993-10-01 with Business & Economics categories.
This paper examines the credibility of the exchange rate policy pursued by the Belgian monetary authorities of pegging the Belgian franc to a narrow fluctuation band around the deutsche mark, in the context of the exchange rate mechanism of the European Monetary System. Simple interest rate corridor analysis, based on the Belgian-German long-term interest rate differential and taking explicit account of the currency’s position within its fluctuation band, would appear to suggest that the hypothesis that long-run exchange rate credibility has been attained should be rejected, even though considerable progress has been made in this regard since the early 1980s. The paper proceeds to decompose the Belgian-German interest rate differential into a sovereign credit risk and an exchange rate risk component, via the modelling of inflationary expectations, and concludes that long-run exchange rate credibility cannot be rejected from 1990 onwards.
Essays In International Finance
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Author : Sören Pippart
language : en
Publisher:
Release Date : 2016
Essays In International Finance written by Sören Pippart and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.