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Author: Cho-Hoi Hui Publisher: ISBN: Category : Languages : en Pages : 16
Book Description
This paper develops a model to value defaultable bonds in emerging markets. Default occurs when some signaling process hits a pre-defined default barrier. The signaling variable is considered to be some macro-economic variables such as foreign exchange rates. The dynamics of the default barrier depends on the volatility and the drift of the signaling variable. We derive a closed-form solution of the defaultable bond price from the model as a function of a signaling variable and a short-term interest rate. The numerical results show that the model values generated by using foreign exchange rates as the signaling variables can broadly track the market credit spreads of defaultable bonds in South Korea and Brazil. Given an expected level of the foreign exchange rate, defaultable bond values under stressed market situation can be obtained.
Author: Cho-Hoi Hui Publisher: ISBN: Category : Languages : en Pages : 16
Book Description
This paper develops a model to value defaultable bonds in emerging markets. Default occurs when some signaling process hits a pre-defined default barrier. The signaling variable is considered to be some macro-economic variables such as foreign exchange rates. The dynamics of the default barrier depends on the volatility and the drift of the signaling variable. We derive a closed-form solution of the defaultable bond price from the model as a function of a signaling variable and a short-term interest rate. The numerical results show that the model values generated by using foreign exchange rates as the signaling variables can broadly track the market credit spreads of defaultable bonds in South Korea and Brazil. Given an expected level of the foreign exchange rate, defaultable bond values under stressed market situation can be obtained.
Author: Mr. Evan Papageorgiou Publisher: International Monetary Fund ISBN: 1616357592 Category : Business & Economics Languages : en Pages : 14
Book Description
An interesting disconnect has taken shape between local currency- and hard currency-denominated bonds in emerging markets with respect to their portfolio flows and prices since the start of the recovery from the COVID-19 pandemic. Emerging market assets have recovered sharply from the COVID-19 sell-off in 2020, but the post-pandemic recovery in 2021 has been highly uneven. This note seeks to answer why. Yields of local currency-denominated bonds have risen faster and are approaching their pandemic highs, while hard currency bond yields are still near their post-pandemic lows. Portfolio flows to local currency debt have similarly lagged flows to hard currency bonds. This disconnect is closely linked to the external environment and fiscal and inflationary pressures. Its evolution remains a key consideration for policymakers and investors, since local markets are the main source of funding for emerging markets. This note draws from the methodology developed in earlier Global Financial Stability Reports on fundamentals-based asset valuation models for funding costs and forecasting models for capital flows (using the at-risk framework). The results are consistent across models, indicating that local currency assets are significantly more sensitive to domestic fundamentals while hard currency assets are dependent on the external risk sentiment to a greater extent. This suggests that the post-pandemic, stressed domestic fundamentals have weighed on local currency bonds, partially offsetting the boost from supportive global risk sentiment. The analysis also highlights the risks emerging markets face from an asynchronous recovery and weak domestic fundamentals.
Author: Frank J. Fabozzi, CFA Publisher: John Wiley & Sons ISBN: 9780471218364 Category : Business & Economics Languages : en Pages : 392
Book Description
An investor's guide to capitalizing on opportunities in the fixed income markets of emerging economies The fixed income market in emerging countries represents a new and potentially lucrative area of investment for professionals, but with great risk. Investing in Emerging Fixed Income Markets shows investors how to identify solid investment opportunities, assess the risk potential, and develop an investment approach to enhance long-term returns. Contributors to this book, among the leading experts from around the world, share their insights, advice, and knowledge on a range of topics that will help investors make the right decisions and choices when dealing with emerging fixed income markets. This fully updated and revised edition of the Handbook of Emerging Fixed Income and Currency Markets is the best guide for navigating the complicated world of emerging fixed income markets. Efstathia Pilarinu (Strasbourg, France) is a consultant specializing in the derivatives and emerging market fixed income areas. She has worked for several major Wall Street firms, including Salomon Brothers, Bankers Trust, Societe General. She has a doctorate degree and an MBA in finance from the University of Tennessee and an undergraduate degree in mathematics from the University of Patras, Greece. John Wiley & Sons, Inc. is proud to be the publisher of the esteemed Frank J. Fabozzi Series. Comprising nearly 100 titles--which include numerous bestsellers--The Frank J. Fabozzi Series is a key resource for finance professionals and academics, strategists and students, and investors. The series is overseen by its eponymous editor, whose expert instruction and presentation of new ideas have been at the forefront of financial publishing for over twenty years. His successful career has provided him with the knowledge, insight, and advice that has led to this comprehensive series. Frank J. Fabozzi, PhD, CFA, CPA, is Editor of the Journal of Portfolio Management, which is read by thousands of institutional investors, as well as editor or author of over 100 books on finance for the professional and academic markets. Currently, Dr. Fabozzi is an adjunct Professor of Finance at Yale University's School of Management and on the board of directors of the Guardian Life family of funds and the Black Rock complex of funds.
Author: Jochen Andritzky Publisher: Springer Science & Business Media ISBN: 3540374493 Category : Business & Economics Languages : en Pages : 261
Book Description
Past cycles of sovereign lending and default suggest that debt crises will recur at some point. This book shows why investors should reckon with similar credit events in the future. Surveying the sovereign bond market, the author provides investors with a useful toolkit for analyzing sovereign bonds and foreseeing trends in the international financial architecture. The result should be a better understanding of debt crises and more deliberate investment decisions.
Author: Iva Petrova Publisher: International Monetary Fund ISBN: 1455252859 Category : Business & Economics Languages : en Pages : 28
Book Description
This paper analyses the determimants of emerging market sovereign bond spreads by examining the short and long-run effects of fundamental (macroeconomic) and temporary (financial market) factors on these spreads. During the current global financial and economic crisis, sovereign bond spreads widened dramatically for both developed and emerging market economies. This deterioration has widely been attributed to rapidly growing public debts and balance sheet risks. Our results indicate that in the long run, fundamentals are significant determinants of emerging market sovereign bond spreads, while in the short run, financial volatility is a more important determinant of sperads than fundamentals indicators.
Author: Salih N. Neftci Publisher: International Monetary Fund ISBN: 1451874375 Category : Business & Economics Languages : en Pages : 31
Book Description
This paper analyzes the price stabilizing properties of puttable and extendible bonds, their potential to help develop interest-rate derivative markets, and their use by governments. Their stabilizing properties imply that, when bond prices fall, prices for puttable and extendible bonds fall by less. Their embedded options work as a cushion and replicate the trading gains from hedging long-term bonds with interest rate derivatives. These bonds can help develop interest-rate derivative markets in developing countries and eventually increase demand for long-term government bonds. Informal evidence from OECD countries suggests that these bonds were useful in the 1980s, when interest rates were volatile.
Author: Mansoor Dailami Publisher: World Bank Publications ISBN: 2005060712 Category : Credit Languages : en Pages : 31
Book Description
Abstract: "The authors offer evidence that U.S. interest rate policy has an important influence in the determination of credit spreads on emerging market bonds over U.S. benchmark treasuries and therefore on their cost of capital. Their analysis improves on the existing literature and understanding by addressing the dynamics of market expectations in shaping views on interest rate and monetary policy changes and by recognizing nonlinearities in the link between U.S. interest rates and emerging market bond spreads, as the level of interest rates affect the market's perceived probability of default and the solvency of emerging market borrowers. For a country with a moderate level of debt, repayment prospects would remain good in the face of an increase in U.S. interest rates, so there would be little increase in spreads. A country close to the borderline of solvency would face a steeper increase in spreads. Simulations of a 200 basis points (bps) increase in U.S. interest rates show an increase in emerging market spreads ranging from 6 bps to 65 bps, depending on debt/GDP ratios. This would be in addition to the increase in the benchmark U.S. 10 year Treasury rate."--World Bank web site.
Author: Nicola Gennaioli Publisher: International Monetary Fund ISBN: 1498391990 Category : Business & Economics Languages : en Pages : 53
Book Description
We analyze holdings of public bonds by over 20,000 banks in 191 countries, and the role of these bonds in 20 sovereign defaults over 1998-2012. Banks hold many public bonds (on average 9% of their assets), particularly in less financially-developed countries. During sovereign defaults, banks increase their exposure to public bonds, especially large banks and when expected bond returns are high. At the bank level, bondholdings correlate negatively with subsequent lending during sovereign defaults. This correlation is mostly due to bonds acquired in pre-default years. These findings shed light on alternative theories of the sovereign default-banking crisis nexus.
Author: Cho-Hoi Hui
Author: Cho-Hoi Hui
Author: Valentin Ulrici
Author: Mr. Evan Papageorgiou
Author: Frank J. Fabozzi, CFA
Author: Jochen Andritzky
Author: Iva Petrova
Author: Salih N. Neftci
Author: Mansoor Dailami
Author: Jorge A. Chan-Lau
Author: Nicola Gennaioli