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Accounting for sovereign tail risk in emerging economies: The role of global and domestic risk factors

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  • Fong, Tom Pak Wing
  • Li, Ka-Fai
  • Fu, John

Abstract

•We examine the role of global and domestic factors for sovereign tail risk.•Sovereign tail risk denotes the likelihood of a sharp rise in sovereign CDS spreads.•A panel logistic model is used to evaluate the importance of risk factors.•Risk factors' explanatory power increases with the severity of tail risk nonlinearly.

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  • Fong, Tom Pak Wing & Li, Ka-Fai & Fu, John, 2018. "Accounting for sovereign tail risk in emerging economies: The role of global and domestic risk factors," Emerging Markets Review, Elsevier, vol. 34(C), pages 98-110.
    • Handle: RePEc:eee:ememar:v:34:y:2018:i:c:p:98-110
    DOI: 10.1016/j.ememar.2017.11.002
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    2. Wang, Jun & Sun, Xiaolei & Li, Jianping, 2020. "How do sovereign credit default swap spreads behave under extreme oil price movements? Evidence from G7 and BRICS countries," Finance Research Letters, Elsevier, vol. 34(C).
    3. Fong, Tom Pak Wing & Wu, Shui Tang, 2020. "Predictability in sovereign bond returns using technical trading rules: Do developed and emerging markets differ?," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).

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