A Simple Approach to Country Risk

37 Pages Posted: 20 Oct 2012 Last revised: 14 Jun 2013

See all articles by Frank Lehrbass

Frank Lehrbass

L*PARC (Lehrbass Predicitive Analytics and Risk Consulting); FOM University of Applied Sciences for Economics and Management; University of the Bundesbank

Date Written: May 11, 1999

Abstract

The no-arbitrage model by Schonbucher is combined with the extended Vasicek Term Structure Model and applied to the pricing of sovereign bonds. Practical hedging according to the model is investigated. A portfolio of bonds is investigated using the risk measures "shortfall" and "Value at Risk".

A revised version has been published in the book: Measuring Risk in Complex Stochastic Systems. Berlin: Springer 2000.

Keywords: country risk, delta hedging, no arbitrage, relative value, sovereign risk, sovereign bonds, emerging markets, hedging EM, hedging sovereign risk, hedging sovereign bonds

JEL Classification: F3, C3, G1, G3

Suggested Citation

Lehrbass, Frank, A Simple Approach to Country Risk (May 11, 1999). Available at SSRN: https://ssrn.com/abstract=2164225 or http://dx.doi.org/10.2139/ssrn.2164225

Frank Lehrbass (Contact Author)

L*PARC (Lehrbass Predicitive Analytics and Risk Consulting) ( email )

Dusseldorf
Germany

HOME PAGE: http://lehrbass.de

FOM University of Applied Sciences for Economics and Management ( email )

Toulouser Allee 53
Dusseldorf, 40476
Germany

University of the Bundesbank ( email )

Schloss
Hachenburg, 57627
Germany

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