PT  - JOURNAL ARTICLE
AU  - Chunlan Wang
TI  - Sovereign Default Concentration Risk Mitigation<br/>in Global Bond Indices
AID  - 10.3905/jii.2012.3.2.056
DP  - 2012 Aug 31
TA  - The Journal of Index Investing
PG  - 56--61
VI  - 3
IP  - 2
4099  - https://pm-research.com/content/3/2/56.short
4100  - https://pm-research.com/content/3/2/56.full
AB  - This article reviews the fundamental shift in the market perception of risk factors in fixed-income investments. The sovereign spread risk has increased substantially in recent years and contributes an even bigger portion than corporate credit spread in some investment universes, like euro treasury fixed-income indices. The major drivers of sovereign spread include economic and financial systematic factors and issuer-specific solvency factors. The concentration of sovereign risk has become a critical concern to the investors in the investment of global treasury securities. This article reports major testing results using an in-house intensity-based sovereign default risk model. The model has been used to evaluate the diversification effect of weighting mechanisms using GDP and fiscal strength as risk indicators.TOPICS: Fixed-income portfolio management, VAR and use of alternative risk measures of trading risk, global