Sovereign credit and exchange rate risks: Evidence from Asia-Pacific local currency bonds

Mikhail Chernov, Drew Creal and Hördahl, Peter
Authors registered in the RePEc Author Service: Peter Hördahl

No 14986, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: 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.

Keywords: Emerging bond markets; Credit risk; Currency risk; Twin ds; Affine model (search for similar items in EconPapers)
JEL-codes: F31 G12 G15 (search for similar items in EconPapers)
Date: 2020-07
New Economics Papers: this item is included in nep-sea
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Citations: View citations in EconPapers (10)

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Related works:
Journal Article: Sovereign credit and exchange rate risks: Evidence from Asia-Pacific local currency bonds (2023)
Working Paper: Sovereign credit and exchange rate risks: evidence from Asia-Pacific local currency bonds (2021)
Working Paper: Sovereign Credit and Exchange Rate Risks: Evidence from Asia-Pacific Local Currency Bonds (2020)
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