RT Journal Article SR Electronic T1 Sovereign Default Concentration Risk Mitigation
in Global Bond Indices JF The Journal of Index Investing FD Institutional Investor Journals SP 56 OP 61 DO 10.3905/jii.2012.3.2.056 VO 3 IS 2 A1 Chunlan Wang YR 2012 UL https://pm-research.com/content/3/2/56.abstract 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