Document Type
Honors Thesis
Abstract
This study characterizes the effects of currency uncertainty on the market prices of sovereign and quasi-sovereign bonds denominated in U.S. dollars for ten Latin American emerging-market economies. Previous authors analyzing sovereign debt prices have generally focused on the nexus between macro fundamentals and sovereign debt pricing, as well as global factors like U.S. interest rates. The dynamic analysis here uses a two-step procedure, where currency uncertainty is measured in the first-step using the GARCH methodology, as pioneered by Engle (1982). Preliminary results show that increases in uncertainty may have significant effects on sovereign debt returns, with the direction of the effect potentially depending on the number of lags between volatility and prices. As one example, currency uncertainty unambiguously has a significant negative effect on prices for Colombia.
Publication Date
4-1-2014
Language
English
License
This work is licensed under a Creative Commons Attribution-NonCommercial-Share Alike 4.0 International License.
Recommended Citation
Yacoub, Juan, "CURRENCY VOLATILITY AND SOVEREIGN DEBT PRICES IN THE OPEN MARKET: A FOCUS ON LATIN AMERICA" (2014). 2014 Spring Honors Capstone Projects. 6.
https://mavmatrix.uta.edu/honors_spring2014/6