This paper presents a benchmarking model for validation of default probabilities of listed companies for Basel II purposes. The model is based on the recent studies on the predictive capability of structural credit risk models. Benchmark ratings and one-year default probabilities are assigned to...

This paper investigates the determinants of variations in the yield spreads (swap spreads) between Hong Kong dollar interest rate swaps and Exchange Fund paper for a period from July 2002 to April 2008. A vector error-correction model is used to analyze the impact of various shocks on swap...

Using data on Brazil, Colombia, Mexico, the Philippines, Russia and Turkey, our empirical results show that the exchange rates of their currencies have adequate explanatory power in explaining their US dollar-denominated sovereign bonds, particularly in the post-crisis period. We develop a...

The study conducts an empirical test on dollar-denominated sovereign credit spreads in emerging markets, including Brazil, Colombia, Mexico, the Philippines, the Russian Federation, and Turkey to examine their relationship with each country's exchange rate and the United States (US) Treasury...

This working paper was written by Cho-Hoi Hui (Hong Kong Monetary Authority), Andrew Wong(Hong Kong Monetary Authority) and Chi-Fai Lo (The Chinese University of Hong Kong).This note uses a target-zone model to study the bond yield movements under yield curve control. The bond yield is assumed...

Using a non-Gaussian affine term-structure model, this paper evaluates the effectiveness of the date-based forward guidance at the zero lower bound. The model extracts the expected dynamics of two state variables (the short-term interest rate and its mean) embedded in the entire Treasury yield...

This paper develops a model based on a target-zone approach in which the dynamics of government bond yields follow a quasi-bounded process, such that the zero lower bound (ZLB) can be breached if the probability leakage condition of the dynamics is met. A one-sided U-shaped bond yield...