Sovereign Bond Risk Management

In the current low yield environment, many Sovereign bonds issued by different countries are priced at similar levels. However, this report demonstrates that default probability estimates made by IRB banks for the same sovereigns show major differences. Using data from 2011 and 2012, this report provides a framework for pricing default risk with important implications for efficient bank and CCP risk management.

The Sovereign Bond market is the benchmark for global interest rates, and is also the most trusted and liquid form of collateral for a growing number of financing and margining transactions. Developed market Government bonds are now so highly valued that in some cases – such as Germany – investors have at times been close to having to pay to hold them.


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Credit Benchmark brings together internal credit risk views from over 40 leading global financial institutions. The contributions are anonymized, aggregated, and published in the form of consensus ratings and aggregate analytics to provide an independent, real-world perspective of credit risk. Risk and investment professionals at banks, insurance companies, asset managers and other financial firms use the data for insights into the unrated, monitoring and alerting within their portfolios, benchmarking, assessing and analyzing trends, and fulfilling regulatory requirements and capital.