Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/220237 
Year of Publication: 
2015
Series/Report no.: 
Discussion Paper No. 148
Publisher: 
Institute for Applied Economic Research (ipea), Brasília
Abstract: 
Our objective is to implement a credit risk pricing model for sovereign bonds and estimate the model for a historical series of yields of emerging markets bonds. We use a reduced model with a Vasicek 2-factor model on Brazilian sovereign data. The estimation occurs in two stages. Using Maximum Likelihood, we first estimate the parameters corresponding to the reference curve. Then, we find the estimates of the set of parameters corresponding to the defaultable curve conditional on the default- free parameters. The estimated model is used to calculate the dynamics of the term structure of interest rates, of credit spreads and of default probabilities.
JEL: 
G12
Document Type: 
Working Paper

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