The dynamic pricing of sovereign risk in emerging markets: Fundamentals and risk aversion

Journal of Fixed Income

Volumn 17, Issue 4, 2008, Pages 57-71

  Remolona, Eli ^a   Scatigna, Michela ^a   Wu, Eliza ^b  

^a BANK FOR INTERNATIONAL SETTLEMENTS   (Switzerland)

^b UNIVERSITY OF NEW SOUTH WALES   (Australia)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 44649119459     PISSN: 10598596     EISSN: None     Source Type: Journal    
DOI: 10.3905/jfi.2008.705542     Document Type: Article

References (40)

1. Ait-Sahaha, Y., and A. Lo. "Nonparametric Estimation of State-Price Densities Implicit in Financial Asset Prices." Journal of Finance, 53 (1998), pp. 499-547.
2. Altman, E.I., and H.A. Rijken. "How Rating Agencies Achieve Rating Stability." Journal of Banking and Finance, 28 (2004), pp. 2679-2714.
3. Amato, J.D., and E.M. Remolona. "The Credit Spread Puzzle." BIS Quarterly Review, (December 2003).
4. Amato, J.D., and E.M. Remolona. "The Pricing of Unexpected Credit Losses." BIS Working paper No. 190, November 2005.
5. Arrellano, M., and S. Bond. "Some Tests of Specification for Panel Sata: Monte Carlo Evidence and an Application to Employment Equations." Review of Economics Studies, 58 (1991), pp. 277-297.
6. Baek, I.-M., A. Bandopadhyaya, and C. Du. "Determinants of Market-Assessed Sovereign Risk: Economic Fundamentals or Market Risk Appetite?" Journal of International Money and Finance, 24 (2005), pp. 533-548.
7. Berndt, A., R. Douglas, D. Duffie, M. Ferguson, and D. Schranz. "Measuring Default Risk Premia from Default Swap Rates and EDFs." BIS Working paper No. 173, 2005.
8. Cantor, R., and F. Packer. "Determinants and Impact of Sovereign Credit Ratings." Federal Reserve Bank of New York Economic Policy Review, 2 (1996), pp. 37-53.
9. Cantor, R., F. Packer, and K. Cole. "Split Ratings and the Pricing of Credit Risk." Journal of Fixed Income, Vol. 7, No. 3 (1997), pp, 72-82.
10. Collin-Dufresne, P., R. Goldstein, and J. Martin. "The Determinants of Credit Spread Changes." Journal of Finance, 56 (2001), pp. 2177-2207.
11. Cumby, R., and T. Pastine. "Emerging Market Debt: Measuring Credit Quality ansd Examining Relative Pricing." Journal of International Money and Finance, 20 (2001), pp. 591-609.
12. Diaz-Weigel, D.D., and G. Gemmill. "What Drives Credit Risk in Emerging Markets? The Roles of Country Fundamentals and Market Co-Movements." Journal of International Money and Finance, 25 (2006), pp. 476-502.
13. Driessen, J. "Is Default Event Risk Priced in Corporate Bonds?" Review of Financial Studies, 18 (2005), pp. 165-195.
14. Duffie, D., L.H. Pedersen, and K.J Singleton. "Modeling Sovereign Yield Spreads: A Case Study of Russian Debt." Journal of Finance, Vol. 58, No. 1 (2003), pp. 119-159.
15. Duffie, D., and K.J. Singleton. Credit Risk: Pricing, Measurement and Management. Princeton, M: Princeton University Press, 2003.
16. Eichengreen, B., and A. Mody. "What Explains Changing Spreads on Emerging-Market Debt: Fundamentals or Market Sentiment?" NBER Working paper No. 6408, 1998.
17. Elton, E., M. Gruber, D. Agrawal, and C. Mann. "Explaining the Rate Spread on Corporate Bonds." Journal of Finance, 56 (2001), pp. 247-277.
18. Ferreira, M., and P. Gama. "Does Sovereign Debt Ratings News Spill Over to International Stock Markets?" Journal of Banking and Finance, 31 (2007), pp. 3162-3182.
19. Gande, A., and D.C. Parsley. "News Soillovers in the Sovereign Debt Market." Journal of Financial Economics, 75 (2005), pp. 691-734.
20. Gapen, M.T., D.E Gray, C.H. Lim, and Y.B. Xiao. "Measuring and Analyzing Sovereign Risk with Contingent Claims." IMF Working paper No. 155, August 2005.
21. Garcia-Herrero, A., and A. Ortiz. "The Role of Global Risk Aversion in Explaining Latin American Sovereign Spreads." Economia, Vol. 7, No. 1 (2007), pp. 125-155.
22. International Monetary Fund. "Global Financial Stability Report." World Economic and Financial Surveys, April 2004.
23. Jackwerth, J.C. "Recovering Risk Aversion from Option Prices and Realized Returns." Review of Financial Studies, 13 (2000), pp. 433-451.
24. Kamin, S., and K. von Kleist. "The Evolution and Determinants of Emerging Market Credit Spreads in the 1990s." BIS Working paper No. 68, 1999.
25. Kim, S.-J., and E. Wu. "Sovereign Credit Ratings, Capital Flows, and Financial Sector Development in Emerging Markets." Emerging Markets Review, Vol. 9, No. 1 (2008), pp. 17-39.
26. Longstaff, F.A., S. Mithal, and E. Neis. "Corporate Yield Spreads: Default Risk or Liquidity? New Evidence from the Credit Default Swap Market." Journal of Finance, 60, No. 5 (2005), pp. 2213-2253.
27. Mauro, P., N. Sussman, and Y. Yafeh, "Emerging Market Spreads: Then versus Now." Quarterly Journal of Economics (May 2002), pp. 695-733.
28. McGuire, P., and M.A. Schrijvers. "Common Factors in Emerging Market Spreads." BIS Quarterly Review (December 2003).
29. Micu, M., E. Remolona, and P. Wooldridge. "The Price Impact of Rating Announcements: Which Announcements Matter?" BIS Working paper No. 207, June 2006.
30. Moody's Investor Service. "Default and Recovery Rates of Sovereign Bond Issuers, 1983-2005." Special Comment, April 2006.
31. Oshiro, N., and Y. Saruwatari. "Quantification of Sovereign Risk: Using the Information in Equity Market Prices." Emerging Markets Review, 6 (2005), pp. 346-362.
32. Pan, J., and K.J. Singleton. "Default and Recovery Implicit in the Term Structure of Sovereign CDS Spreads." Working paper, 2006.
33. Remolona, E., M. Scatigna, and E. Wu. "Interpreting Sovereign Spreads." BIS Quarterly Review (March 2007).
34. Remolona, E., M. Scatigna, and E. Wu. "A Ratings Based Approach to Measuring Sovereign Risk." International Journal of Finance and Economics, Vol. 13, No. 1 (2008), pp. 26-39.
35. Standard and Poor's. "2005 Transition Data for Rated Sovereigns." Commentary Report (February 2006).
36. Sturzenegger, F., and J. Zettelmeyer. "Haircuts: Estimating Investor Losses in Sovereign Debt Restructurings, 1998-2005." Journal of International Money and Finance, forthcoming 2008.
37. Sy, A.N. "Emerging Market Bond Spreads and Sovereign Credit Ratings: Reconciling Market Views with Economic Fundamentals." Emerging Markets Review, 3 (2002), pp. 380-408.
38. Tarashev, N., K. Tsatsaronis, and D. Karampatos. "Investors' Attitudes towards Risk: What Can We Learn from Options?" BIS Quarterly Review (June 2003).
39. Westphalen, M. "The Determinants of Sovereign Bond Credit Spread Changes." Working paper, University of Lausanne, 2001.
40. Zhu, H. "An Empirical Comparison of Credit Spreads between the Bond Market and the Credit Default Swap Market." BIS Working paper No. 160, August 2004.