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Interpreting Sovereign Spreads

BIS Quarterly Review, March 2007

13 Pages Posted: 19 Jun 2012

See all articles by Eli M. Remolona

Eli M. Remolona

Bank for International Settlements (BIS) - Monetary and Economic Department

Michela Scatigna

Bank for International Settlements (BIS)

Eliza Wu

The University of Sydney - Business School; Financial Research Network (FIRN)

Date Written: March 2007

Abstract

Sovereign spreads can be broken up into two components: the expected loss from default and the risk premium, with the latter reflecting how investors price the risk of unexpected losses. We show that the risk premium is often the larger part of the spread.

JEL Classification: G15, F34

Suggested Citation

Remolona, Eli M. and Scatigna, Michela and Wu, Eliza, Interpreting Sovereign Spreads (March 2007). BIS Quarterly Review, March 2007, Available at SSRN: https://ssrn.com/abstract=1600047

Eli M. Remolona (Contact Author)

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

IFC 2 Bldg, 78/F
Central
Hong Kong
Hong Kong
+852 2982 7150 (Phone)
+852 2982 7123 (Fax)

Michela Scatigna

Bank for International Settlements (BIS) ( email )

Basel, 4002
Switzerland

Eliza Wu

The University of Sydney - Business School ( email )

University of Sydney
Darlington
Sydney, NSW 2006
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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