Saturday, July 2, 2011

Understanding Sovereign Credit Risk

One of the phenomena in sovereign credit is that the spread that certain countries and regions have to pay over the benchmark (such as US Treasurys or German Bunds) persists for many, many years. Surely some of it is factors such as intertia and liquidity. Some of it is simply credit risk: who is a more credit-worhty borrower? Since I like looking for new perspectives, here's a couple of brass music videos, one is from the Balkans (Greece, fmr Yugoslavia, Albania, Bulgaria, etc.), one is from Germany. Whom would you rather lend to? (based on some feedback, I should point out that these are extreme, caricature examples not to be taken literally)

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