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

• 成果类型: Article
• 署名作者: Chernov, Mikhail; Creal, Drew; Hoerdahl, Peter
• 署名单位: University of California System; University of California Los Angeles; University of Notre Dame; Bank for International Settlements (BIS)
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2022.103692
• 发表日期: 2023
• 关键词: Emerging bond markets; Credit risk; Currency risk; Twin Ds; Aff ine model

摘要

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 interac-tion. 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 dramati-cally improve the investment frontier.(c) 2022 Elsevier B.V. All rights reserved.