Decomposing risks in bond portfolios: International evidence

David Sun, Shih Chuan Tsai, Chun Da Chen

研究成果: 雜誌貢獻期刊論文同行評審


This study recalibrates corporate bond idiosyncratic risks in an international context. By applying a statistically powerful risk decomposition scheme, the authors show that diversification is significantly improved by the addition of a global risk benchmark. They construct a longrun stationary yield spread decomposition scheme that further provides a better diversification effect. In addition to global liquidity and default risk factors, a countryspecific default risk component is included, and all of them are free of measurement or availability issues. The idiosyncratic risk component is estimated as a fixed effect along with all the parameter estimates, rather than separately from an exogenous generating process. The linear model is simple, yet it can be easily and promptly applied by practitioners.

頁(從 - 到)75-93
期刊Journal of Fixed Income
出版狀態已發佈 - 2016 6月 1

ASJC Scopus subject areas

  • 金融
  • 經濟學與計量經濟學


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