Sovereign bond-backed securities: a VAR-for-VaR and Marginal Expected Shortfall assessment

Arbeitspapier

The risk reducing benefits of the sovereign bond-backed security (SBBS) proposal of Brunnermeier et al (2011, 2016, 2017) have been assessed in terms of the likely losses that different kinds of holders would suffer under simulated default scenarios. However, the effects of mark-to-market losses that may occur when there is rising uncertainty about defaults, or when self-fulfilling destablising dynamics are prevalent, have not yet been examined. We apply the "VAR-for-VaR" method of White, Kim and Manganelli (2015) and the Marginal Expected Shortfall approach of Brownlees and Engle (2012, 2017) to estimated yields of SBBS to assess how ex ante exposures are likely to playout under various securitisation structures. We compare these with exposures of single sovereigns and a diversified portfolio. We find that the senior SBBS has extremely low ex ante tail risk and that, like the lowest-risk single-named sovereigns, it acts as a hedge against extreme adverse movements in the yields on more junior tranches. The mezzanine SBBS has tail risk exposure similar to that of Italian and Spanish bonds. Yields on SBBS appear to be adequate compensation for their risks when compared with single sovereigns or a diversified portfolio.

Angaben zum Objekt

• ISBN: 978-92-9472-017-7
• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: ESRB Working Paper Series ; No. 65

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Interest Rates: Determination, Term Structure, and Effects ; Financial Markets and the Macroeconomy ; Monetary Policy ; Asset Pricing; Trading Volume; Bond Interest Rates ; Information and Market Efficiency; Event Studies; Insider Trading
• Thema: Safe Assets ; Sovereign Bonds ; Value-at-Risk ; Spillover ; CAViaR ; Co-Dependence

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): de Sola Perea, Maite ; Dunne, Peter G. ; Puhl, Martin ; Reininger, Thomas
• Ereignis: Veröffentlichung
• (wer): European Systemic Risk Board (ESRB), European System of Financial Supervision
• (wo): Frankfurt a. M.
• (wann): 2018

Weitere Informationen

• DOI: doi:10.2849/651144
• Handle: http://hdl.handle.net/10419/193572
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ