How Sovereign Is Sovereign Credit Risk?
Longstaff, Francis A; Pan, Jun; Pedersen, Lasse H; Singleton, Kenneth J
2011-04-01 00:00:00
Abstract We study the nature of sovereign credit risk using an extensive set of sovereign CDS data. We find that the majority of sovereign credit risk can be linked to global factors. A single principal component accounts for 64 percent of the variation in sovereign credit spreads. Furthermore, sovereign credit spreads are more related to the US stock and high-yield markets than they are to local economic measures. We decompose credit spreads into their risk premium and default risk components. On average, the risk premium represents about a third of the credit spread. (JEL F34, G15, O16, O19, P34 )
http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.pngAmerican Economic Journal: MacroeconomicsAmerican Economic Associationhttp://www.deepdyve.com/lp/american-economic-association/how-sovereign-is-sovereign-credit-risk-0kroF0oSbi
Abstract We study the nature of sovereign credit risk using an extensive set of sovereign CDS data. We find that the majority of sovereign credit risk can be linked to global factors. A single principal component accounts for 64 percent of the variation in sovereign credit spreads. Furthermore, sovereign credit spreads are more related to the US stock and high-yield markets than they are to local economic measures. We decompose credit spreads into their risk premium and default risk components. On average, the risk premium represents about a third of the credit spread. (JEL F34, G15, O16, O19, P34 )
Journal
American Economic Journal: Macroeconomics
– American Economic Association
To get new article updates from a journal on your personalized homepage, please log in first, or sign up for a DeepDyve account if you don’t already have one.
All DeepDyve websites use cookies to improve your online experience. They were placed on your computer when you launched this website. You can change your cookie settings through your browser.