The news impact curve: An analysis of dollar denominated credit markets

Financial asset prices mirror investors’ expectations and risk perception, which translate into volatility. This volatility, or investment risk, is a key part of the investment decision and has been the target of several studies for several asset classes throughout the years. This study aims to determine if the conditional volatility of credit markets in dollars can be modelled, and if so, if it can be explained by external regressors. Building on existing frameworks, several ARCH type structures will be tested, including those which allow for leverage and asymmetry effects. Monthly returns of the Bloomberg Barclays Investment Grade USD index are going to be analysed and fitted, and the external variables used, based on literature review, include macroeconomic releases, macro prudential indicators and general news flow that can induce uncertainty, and therefore volatility. For the later, the EPU index will be used as a proxy. Analysis of the modelled structures conclude that it is possible to model conditional volatility using the aforementioned variables, with an EGARCH model. Further research is recommended to explore interest rate and excess returns components’ isolated response to these variables, which could strengthen the model.Os preços dos ativos financeiros refletem as expectativas e a perceção de risco dos investidores, o que se traduz em volatilidade. Essa volatilidade, ou risco associado ao investimento, é uma parte essencial da decisão de investimento e tem sido alvo de vários estudos para as diversas classes de ativos ao longo dos anos. Este estudo tem como objetivo determinar se a volatilidade condicional dos mercados de crédito em dólares pode modelizada e, em caso afirmativo, se pode ser explicada por regressores externos. Com base em modelos existentes, várias estruturas do tipo ARCH serão testadas, incluindo aquelas que efetivamente apreendem o efeito de alavancagem e assimetria. Os retornos mensais do índice Bloomberg Barclays Investment Grade USD serão analisados e ajustados a estas estruturas, e as variáveis externas utilizadas, com base na revisão da literatura, incluem dados macroeconómicos, indicadores macro prudenciais e notícias do espectro geral que podem induzir incerteza e, consequentemente, volatilidade. Para estas últimas será utilizado como proxy o índice EPU. A análise dos diversos modelos permite inferir que é possível modelar a volatilidade condicional usando as variáveis supramencionadas com um modelo EGARCH. Estudos futuros neste âmbito deverão explorar a resposta isolada das duas componentes dos índices de crédito, a taxa de juro e o excesso de retorno, a essas variáveis, o poderia fortalecer o modelo

Bridging emerging market models and investors realities: the case of currency and external debt markets.

PhDOur target is to objectively quantify important aspects of emerging economies’ financial markets and deliver value adding actionable recommendations that can be used by a wide spectrum of end-users like academics, policy makers and real life investors. We create two quantitative models that capture the dynamics of global Emerging Market currencies and sovereign debt ratings. We build on the extensive literature on Emerging Market crises and introduce a number of methodological and conceptual innovations. A wide range of market stylized facts and practical and intuitive limitations dictate the way we progress with our research, from considering and selecting dependent and explanatory variables to the way we apply and interpret the model results. We first estimate a parsimonious panel specification that models and forecasts Emerging Market currency dynamics and produces trade signals for investing in one-month forward exchange rates. The second instrument models and forecasts credit ratings assigned by two of the leading rating agencies to Emerging Market sovereigns. The specifications we select are tested on the basis of their statistical and forecasting performance which is found to be solid and unbiased. The currency model is further tested based on its ability to generate profit making trading portfolios. The ratings model is also assessed based on its forecasts for forthcoming sovereign rating actions. We proceed to apply both models on real time data and compare the results from blindly following the model recommendations to a situation where an investor filters these results by superimposing his market awareness and subjective judgement. Our findings suggest that the tools developed here can reliably be integrated in an investor’s decision process. The events of late 2010 suggest that many of the ideas presented in our work can be implemented to Developed Markets and be expected to produce interesting and usable results

COVID-19 in Indonesia

This book assesses the impacts of COVID-19 on the Indonesian economy, particularly on employment, education, poverty, trade, and macro economy. The book explains how fiscal and monetary stimulus work and the roles of local governments in managing stimulus. It also presents ways to recovery and lessons learnt from countries that have found success in mitigating the economic impacts of the pandemic (China, Germany, Singapore, and Vietnam). This book will be a useful reference for policy makers, scholars, students, and public audience working or having interest in the fields of development economics, trade, health economics, economics, and East Asia

COVID-19 in Indonesia

This book assesses the impacts of COVID-19 on the Indonesian economy, particularly on employment, education, poverty, trade, and macro economy. The book explains how fiscal and monetary stimulus work and the roles of local governments in managing stimulus. It also presents ways to recovery and lessons learnt from countries that have found success in mitigating the economic impacts of the pandemic (China, Germany, Singapore, and Vietnam). This book will be a useful reference for policy makers, scholars, students, and public audience working or having interest in the fields of development economics, trade, health economics, economics, and East Asia