Hi Sir, in the first method to find default spread we are subtracting the US bond rate , but why we are not taking default rate of US bond in our calculations? if we subtract default risk of emerging govt from its bond rate the result will still have the US default rate right? shouldn't we subtract it as well from final result. in this case we are considering US bond rate as risk free but it has its own default rate as well.
How the counterparty risk and us cds are related in any sense? Any insurance company not paying the money back and estimating this risk using us government cds default spread is not understandable to me. Can anyone please explain the reason behind this.
Dear sir, I took an example with Vietnam Dong: Government 10 year bond rate is about 2.5% Vietnam is rated Ba3 => Default Spread = 4.22% Risk free rate (VND) = Government bond - Default Spread = 2.5 - 4.22 = -1,72% So in this case the Risk free rate in Vietnam is negative. Is something wrong sir? And Indian is rated higher Vietnam but why Indian Bond rate is higher than Vietnam Bond, I thought Indian is safer so the Bond rate should be lower, right?
Prof, there is some missing about historical risk premium at the end of video.
Thank you for a great lesson. Finally have an understanding of the logic behind interest rates. Can proxy with real growth + inflation.
Professor !!! Very happy to watch this course. Regards from Mexico City!
Hello Sir, the Slides PDF for this session is not loading. Could you please check ?
excellent class, thank you so much.
Love from Brazil.
Hi Sir,
in the first method to find default spread we are subtracting the US bond rate , but why we are not taking default rate of US bond in our calculations? if we subtract default risk of emerging govt from its bond rate the result will still have the US default rate right? shouldn't we subtract it as well from final result. in this case we are considering US bond rate as risk free but it has its own default rate as well.
How the counterparty risk and us cds are related in any sense? Any insurance company not paying the money back and estimating this risk using us government cds default spread is not understandable to me. Can anyone please explain the reason behind this.
WONDERFUL AND USEFUL PRESENTATION, THANKS A LOT FOR KNOWLEDGE SHARING
Dear sir, I took an example with Vietnam Dong:
Government 10 year bond rate is about 2.5%
Vietnam is rated Ba3 => Default Spread = 4.22%
Risk free rate (VND) = Government bond - Default Spread = 2.5 - 4.22 = -1,72%
So in this case the Risk free rate in Vietnam is negative. Is something wrong sir? And Indian is rated higher Vietnam but why Indian Bond rate is higher than Vietnam Bond, I thought Indian is safer so the Bond rate should be lower, right?
It's because of the inflation. Higher inflation rate of a country have higher risk free rates and vice versa.
The video cuts off!
This class is really useful to me
Prof., the link "Sovereign CDS spreads - Jan 2020" does not work.
Replace .xls with .xlsx
59:27
I am Turkish. That is exactly what happens sadly. I didnt expect to hear that here. Got me depressed...