A new road to recovery

Emerging markets

In times of distress, when a country loses access to markets, there is evidence that credit default swap (CDS) spreads are a better indicator for sovereign risk than indexes such as the EMBI+ sub-index for the country.

However, it is not easy to discern the variables that determine the level of CDS spreads in emerging markets – traders only quote the CDS spreads and not the inputs required to calculate such spreads.

In this article, we consider some evidence from Argentina and Brazil that

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