A Novel Approach to Modeling Price Volatility of Sovereign Debt Instruments – The Example of the Croatian Government’s Debt-Based Instruments
A Novel Approach to Modeling Price Volatility of Sovereign Debt Instruments – The Example of the Croatian Government’s Debt-Based Instruments

Summary/Abstract: Debt-based financial instruments are specific due to the maturity component and conventional approaches in estimating their volatility may not be applicable. This paper focuses on modeling and forecasting price volatility of sovereign debt instruments while taking into account their maturity. In doing so we propose a simple and useful technique for obtaining the desired confidence of volatility estimates. The proposed approach provides price volatility estimates for debt instruments issued by Croatian government denominated in HRK and in EUR.

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