How Sovereign Is Sovereign Credit Risk?
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 cre...
| Main Authors: | , , , |
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| Other Authors: | |
| Format: | Article |
| Language: | en_US |
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American Economic Association
2011
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| Online Access: | http://hdl.handle.net/1721.1/65581 https://orcid.org/0000-0003-0161-9465 |
| _version_ | 1811091408751165440 |
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| author | Longstaff, Francis A. Pan, Jun Pederson, Lasse H. Singleton, Kenneth J. |
| author2 | Sloan School of Management |
| author_facet | Sloan School of Management Longstaff, Francis A. Pan, Jun Pederson, Lasse H. Singleton, Kenneth J. |
| author_sort | Longstaff, Francis A. |
| collection | MIT |
| description | 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. |
| first_indexed | 2024-09-23T15:01:57Z |
| format | Article |
| id | mit-1721.1/65581 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T15:01:57Z |
| publishDate | 2011 |
| publisher | American Economic Association |
| record_format | dspace |
| spelling | mit-1721.1/655812022-10-02T00:06:04Z How Sovereign Is Sovereign Credit Risk? Longstaff, Francis A. Pan, Jun Pederson, Lasse H. Singleton, Kenneth J. Sloan School of Management Pan, Jun Pan, Jun 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. 2011-08-31T20:06:58Z 2011-08-31T20:06:58Z 2011-04 Article http://purl.org/eprint/type/JournalArticle 1945-7715 1945-7707 http://hdl.handle.net/1721.1/65581 Longstaff, Francis A et al. “How Sovereign Is Sovereign Credit Risk?” American Economic Journal: Macroeconomics 3.2 (2011) : 75-103. https://orcid.org/0000-0003-0161-9465 en_US http://www.aeaweb.org/articles.php?doi=10.1257/mac.3.2.75 American Economic Journal: Macroeconomics Creative Commons Attribution-Noncommercial-Share Alike 3.0 http://creativecommons.org/licenses/by-nc-sa/3.0/ application/pdf American Economic Association MIT web domain |
| spellingShingle | Longstaff, Francis A. Pan, Jun Pederson, Lasse H. Singleton, Kenneth J. How Sovereign Is Sovereign Credit Risk? |
| title | How Sovereign Is Sovereign Credit Risk? |
| title_full | How Sovereign Is Sovereign Credit Risk? |
| title_fullStr | How Sovereign Is Sovereign Credit Risk? |
| title_full_unstemmed | How Sovereign Is Sovereign Credit Risk? |
| title_short | How Sovereign Is Sovereign Credit Risk? |
| title_sort | how sovereign is sovereign credit risk |
| url | http://hdl.handle.net/1721.1/65581 https://orcid.org/0000-0003-0161-9465 |
| work_keys_str_mv | AT longstafffrancisa howsovereignissovereigncreditrisk AT panjun howsovereignissovereigncreditrisk AT pedersonlasseh howsovereignissovereigncreditrisk AT singletonkennethj howsovereignissovereigncreditrisk |