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Interpreting sovereign spreads

Author

Listed:
  • Eli M Remolona
  • Michela Scatigna
  • Eliza Wu

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.

Suggested Citation

  • Eli M Remolona & Michela Scatigna & Eliza Wu, 2007. "Interpreting sovereign spreads," BIS Quarterly Review, Bank for International Settlements, March.
    • Handle: RePEc:bis:bisqtr:0703e
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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