Sovereign Rating Transitions And The Price Of Default Risk In Emerging Markets

Alena Audzeyeva and Klaus Schenk-Hoppé
Additional contact information
Alena Audzeyeva: University of Leeds, Business School

No 07-18, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: This paper introduces an expected value estimator with “expert knowledge” to the robust estimation of sovereign rating transitions which are characterised by few observations. Our estimates of default premia within Mexican, Colombian and Brazilian Eurobond yield spreads provide a better fit than ‘cohort’ and continuous-time observation approaches. The analysis suggests that default risk accounted for a rather small share (decreasing with maturity) of the yield spreads for non-investment grade Colombian and Brazilian Eurobonds in 2003. This share increased while yield spreads fell during 2003-2005 mainly due to non-default risk factors. Default and liquidity premia for investment-grade Mexican spreads both decreased at similar rates.

Keywords: Emerging markets; sovereign default; rating transitions; yield spreads; default premia (search for similar items in EconPapers)
JEL-codes: C11 F34 G15 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2007-05
New Economics Papers: this item is included in nep-rmg
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://ssrn.com/abstract=999316 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 410 Gone (http://ssrn.com/abstract=999316 [301 Moved Permanently]--> https://ssrn.com/abstract=999316 [301 Moved Permanently]--> https://www.ssrn.com/abstract=999316 [302 Moved Temporarily]--> https://papers.ssrn.com/sol3/papers.cfm?abstract_id=999316)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp0718

Access Statistics for this paper

More papers in Swiss Finance Institute Research Paper Series from Swiss Finance Institute Contact information at EDIRC.
Bibliographic data for series maintained by Ridima Mittal ().