Risks of Latin America sovereign debts before and after the financial crisis

Tse-Shih Wang, Chengxue Yao

Research output: Contribution to journalArticlepeer-review

7 Citations (Scopus)

Abstract

We investigate the financial determinants of the return and volatility of sovereign CDS spread from six major Latin American countries before and after the bankruptcy of Lehman Brothers. Other than CBOE VIX index, we also find that global factors including US Baa-Aaa default yield, TED spread and US Treasury rate all contribute to the changes in these sovereign CDS spread. Although global risk aversion (VIX) is a significant determinant of sovereign debt spread, in the years after the crisis, the emphasis has shifted towards short-term refinancing risk (TED). Furthermore, the risk of Greek sovereign debt crisis also transmitted Latin American CDS spreads immediately, but only in the post-Lehman sub-period. These findings provide implications for international bonds and credit derivatives trading strategies.

Original languageEnglish
Pages (from-to)1665-1676
Number of pages12
JournalApplied Economics
Volume46
Issue number14
DOIs
Publication statusPublished - 2014 Feb 25

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Fingerprint Dive into the research topics of 'Risks of Latin America sovereign debts before and after the financial crisis'. Together they form a unique fingerprint.

Cite this