English, Article, Journal or magazine article edition: Modelling long memory and risk premia in Latin American sovereign bond markets Alfonso Mendoza

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Bookmark: http://trove.nla.gov.au/version/34117
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Modelling long memory and risk premia in Latin American sovereign bond markets
Author
  • Alfonso Mendoza
Physical Description
  • preprint
Notes
  • A family of credit risk models is proposed to capture three salient features of Latin American (LA) Sovereign Bond Markets: individual Long Range Dependence in volatility---Long Memory (LM)---, high fractional comovement and time varying risk premia. Evidence in favor of LM is uncovered and the extent of Default Risk Contagion in these markets during the nineties is measured. Among others, the results suggest that the response of bond spread changes to volatility shocks is not statistically different, indicating that a common source may be driving the market. Also, the extent of fractional comovement is high and the magnitude of the risk premia for investing in these bond markets is substantial. Our suggested family of bivariate Fractional Integrated GARCH-in-Mean models is preferred to Brunetti (2000) and Teyssière (1998) processes as indicated by Schwartz Information Criteria and Likelihood Ratio tests.
  • Financial Stability, Credit Risk, Default Risk Contagion, Long Memory, Bivariate FIGARCH(1,d,1)-in-Mean, Emerging Markets.
  • RePEc:wpa:wuwpem:0410004
  • RePEc:mmf:mmfc03:65
Language
  • English
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