Sovereign Default Risk In Developing Economies

This paper examines the use cases for Credit Benchmark’s Consensus Probabilities of Default (Consensus PDs), in the context of more established indicators of Sovereign Default Risk. We suggest that Consensus PDs, as an additional dataset that is both robust and broad, can play a valuable role in compensating for low signal-to-noise in other metrics. It can also provide a basis on which to fill coverage gaps in indicators such as CDS and bond yields, and offer an alternative form of beta metric at the portfolio level.

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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.