Mostrando las entradas de 2019

Latam Goverment Bonds: a Value at Risk revision

Recent political and economic turmoils in Argentina, Bolivia and Ecuador have resulted in a stark change in the short term trends of Latin America bond prices. In the year ended on 19th November 2019, such a regional portfolio's value decreased 5.2%. However, going-forward the yearly potential losses amount to 18.4%. Using bonds from Ecuador, Colombia, Bolivia, Chile, Peru, Argentina, Brazil, and Mexico which represent 88% of the regional GDP (excluding Cuba and Venezuela on data-grounds), we build three value-at-risk (VaR) measures to represent the potential losses due to exposure to the region. We present the results for the total portfolio and the individual bonds. Although the portfolio benefits the from diversification (the aggregate individual bonds perform 2x poorer), the risk/return relationship has categorically deteriorated on all but the Brazil, Colombia and Mexico bonds. While all bonds have seen a reduction on the average return, the later ones managed a vol