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Aswath Damodaran 1 Riskfree Rates and Default Spreads

Riskfree Rates and Default Spreads - New York University

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Page 1: Riskfree Rates and Default Spreads - New York University

Aswath Damodaran! 1!

Riskfree Rates and Default Spreads

Page 2: Riskfree Rates and Default Spreads - New York University

Aswath Damodaran! 2!

Page 3: Riskfree Rates and Default Spreads - New York University

Aswath Damodaran! 3!

Page 4: Riskfree Rates and Default Spreads - New York University

Aswath Damodaran! 4!

CDS Spreads

Page 5: Riskfree Rates and Default Spreads - New York University

Aswath Damodaran! 5!

CDS Spreads: Long term

Page 6: Riskfree Rates and Default Spreads - New York University

Aswath Damodaran! 6!

CDS Spreads: Short term response

Page 7: Riskfree Rates and Default Spreads - New York University

Aswath Damodaran! 7!

Page 8: Riskfree Rates and Default Spreads - New York University

Aswath Damodaran! 8!

Equity Market Volatility

Page 9: Riskfree Rates and Default Spreads - New York University

Aswath Damodaran! 9!

Bond Market Volatility

Page 10: Riskfree Rates and Default Spreads - New York University

Aswath Damodaran! 10!

Country Risk Premium for Peru

 Default Spread for Peru •  Sovereign Bond spread = 1.55% •  CDS spread = 1.52% •  Bond rating (Baa3) spread = 2.00%

 Country Risk premium •  Default spread * (Equity volatility/ Bond volatility) = 2.00% (19.207/14.531) = 2.64%

Page 11: Riskfree Rates and Default Spreads - New York University

Aswath Damodaran! 11!

Country Risk Premiums!January 2011!

Angola 11.00% Botswana 6.50% Egypt 8.60% Mauritius 7.63% Morocco 8.60% South Africa 6.73% Tunisia 7.63%

Austria [1] 5.00% Belgium [1] 5.38% Cyprus [1] 6.05% Denmark 5.00% Finland [1] 5.00% France [1] 5.00% Germany [1] 5.00% Greece [1] 8.60% Iceland 8.00% Ireland [1] 7.25% Italy [1] 5.75% Malta [1] 6.28% Netherlands [1] 5.00% Norway 5.00% Portugal [1] 6.28% Spain [1] 5.38% Sweden 5.00% Switzerland 5.00% United Kingdom 5.00%

Canada 5.00% United States 5.00%

Bahrain 6.73% Israel 6.28% Jordan 8.00% Kuwait 5.75% Lebanon 11.00% Oman 6.28% Qatar 5.75% Saudi Arabia 6.05% United Arab Emirates 5.75%

Australia 5.00%

New Zealand 5.00%

Bangladesh 9.88% Cambodia 12.50% China 6.05% Fiji Islands 11.00% Hong Kong 5.38% India 8.60% Indonesia 9.13% Japan 5.75% Korea 6.28% Macao 6.05% Mongolia 11.00% Pakistan 14.00% Papua New Guinea 11.00% Philippines 9.88% Singapore 5.00% Sri Lanka 11.00% Taiwan 6.05% Thailand 7.25% Turkey 9.13%

Albania 11.00% Armenia 9.13% Azerbaijan 8.60% Belarus 11.00% Bosnia and Herzegovina 12.50% Bulgaria 8.00% Croatia 8.00% Czech Republic 6.28% Estonia 6.28% Hungary 8.00% Kazakhstan 7.63% Latvia 8.00% Lithuania 7.25% Moldova 14.00% Montenegro 9.88% Poland 6.50% Romania 8.00% Russia 7.25% Slovakia 6.28% Slovenia [1] 5.75% Ukraine 12.50%

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