 Extracting global factors from local yield curvesJournal of Asset Management, 2019, vol. 20, issue 5, No 2, 350 pages Abstract: Abstract Commonalities between major developed countries’ term structures are a stylized fact well documented. However, there is a gap between witnessing cross-linkages and identifying common factors at an international level. In this paper, after making the case for the existence of such phenomenon, we aim at constructing a global risk model using the term structure from major bond-issuing countries from 1997 to 2016, thus incorporating the recent unconventional monetary policies. The goal is twofold: first, this allows quantifying global interest risk (level, slope and curvature), providing insights on global risks at play. Additionally, it helps improving our understanding behind the economic factors driving these global factors. We conclude that such framework allows to replicate stylized facts thoroughly while providing valuable insights on country’s contribution to global yield curve movements, which may be applied to risk appraisal of an international bond portfolio. Keywords: Yield curve; Sovereign bonds; Term structure; Dynamic factor model (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pal:assmgt:v:20:y:2019:i:5:d:10.1057_s41260-019-00126-4 Ordering information: This journal article can be ordered from DOI: 10.1057/s41260-019-00126-4 Access Statistics for this article Journal of Asset Management is currently edited by Marielle de Jong and Dan diBartolomeo More articles in Journal of Asset Management from Palgrave Macmillan |
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