Charta is on Google Play: practise on the go. Get the app
Charta

Explain what must be considered when building and running credit portfolios that span several countries

CFA® Level III · Portfolio Management Pathway · Fixed-Income Active Management: Credit Strategies · L3.PM.6.i

The idea

Global credit adds several dimensions: currency exposure and the cost of hedging it; different legal systems, bankruptcy regimes and creditor rights, which affect recovery; varying disclosure and accounting standards; and different sector mixes across markets. Emerging market credit adds sovereign and political risk, commodity dependence, capital controls and thinner trading, and issuers may be state-owned or enjoy implicit government support. Local-currency bonds give the investor currency risk; hard-currency bonds shift the mismatch onto the issuer, which raises default risk if its home currency falls. Hedged comparisons must include hedging costs and the cross-currency basis. The trap is assuming a wider spread abroad is cheap; it may simply pay for weaker recovery, liquidity and currency risk.

In the app: 1 practice questions on this outcome, a narrated walkthrough with diagrams, spaced review that brings it back before you forget it.

Take the free diagnostic →

More in Fixed-Income Active Management: Credit Strategies