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Journal of International

By Are Risk, Free Government, Bonds Risk, Free Indeed, Yakim Kitanov and Gusla St

Abstract

It has been considered that government bonds in their varieties are risk-free. This has led to the accumulation of debt in the form of this type of securities by many investor, both institutional and individual. Contrary to the common understanding that government bonds are risk-free, they are not. They are exposed to at least three types of risks: 1) risk of default (credit risk), 2) inflation risk, and 3) currency risk. It is correct to consider that they are guaranteed in terms of nominal value but since risk of default exists, this means that they are actually not guaranteed even in terms of nominal value. The aim of the current paper is to present a conceptual framework related to the main types of risks associated with government bonds and to outline some important considerations for investors in this respect

Topics: Key words, government bonds, currency risk, credit risk, financial risk
Year: 2016
OAI identifier: oai:CiteSeerX.psu:10.1.1.950.9675
Provided by: CiteSeerX
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