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Time, trust and credit-risk exposure in a trade war
Adopting a credit-risk model based on issuer-specific curves and relevant cluster curves allows asset owners to capture changes in investor sentiment as they occur. This is especially important during turbulent periods such as we face now.
![Time, trust and credit-risk exposure in a trade war](https://cdn.i.haymarketmedia.asia/?n=asian-investor%2Fcontent%2F20190917123209_trade%20war.jpg&c=1&h=677&q=100&v=20242901&w=1204)
The world of fixed income is inherently quantitative; it involves managing a three-way tradeoff between reward (interest-rate risk), trust (credit risk), and time (spread duration). For Asian high yields, managing that tradeoff can be especially tricky—but a granular risk model can help.
Let’s take some analogies. Say a close relative wants to borrow $100 until his next paycheck. He offers to repay you $105 at that time. Being a relative, you’re probably willing to waive the $5 in…
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