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Optimal Maturity Structure of Sovereign Debt in Situation of Near Default

2014-09-12 Business & Economics
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Release : 2014-09-12
Genre : Business & Economics
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Book Rating : 436/5 ( reviews)

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Book Synopsis Optimal Maturity Structure of Sovereign Debt in Situation of Near Default by : Gabriel Desgranges

Download or read book Optimal Maturity Structure of Sovereign Debt in Situation of Near Default written by Gabriel Desgranges. This book was released on 2014-09-12. Available in PDF, EPUB and Kindle. Book excerpt: We study the relationship between default and the maturity structure of the debt portfolio of a Sovereign, under uncertainty. The Sovereign faces a trade-off between a future costly default and a high current fiscal effort. This results into a debt crisis in case a large initial issuance of long term debt is followed by a sequence of negative macro shocks. Prior uncertainty about future fundamentals is then a source of default through its effect on long term interest rates and the optimal debt issuance. Intuitively, the Sovereign chooses a portfolio implying a risk of default because this risk generates a correlation between the future value of long term debt and future fundamentals. Long term debt serves as a hedging instrument against the risk on fundamentals. When expected fundamentals are high, the Sovereign issues a large amount of long term debt, the expected default probability increases, and so does the long term interest rate.

Optimal Maturity Structure of Sovereign Debt in Situations of Near Default

2014
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Release : 2014
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Kind : eBook
Book Rating : /5 ( reviews)

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Book Synopsis Optimal Maturity Structure of Sovereign Debt in Situations of Near Default by : Gabriel Desgranges

Download or read book Optimal Maturity Structure of Sovereign Debt in Situations of Near Default written by Gabriel Desgranges. This book was released on 2014. Available in PDF, EPUB and Kindle. Book excerpt:

Sovereign Debt Maturity Structure Under Asymmetric Information

2013
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Release : 2013
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Book Synopsis Sovereign Debt Maturity Structure Under Asymmetric Information by : Diego J. Perez

Download or read book Sovereign Debt Maturity Structure Under Asymmetric Information written by Diego J. Perez. This book was released on 2013. Available in PDF, EPUB and Kindle. Book excerpt:

Default and the Maturity Structure in Sovereign Bonds

2015
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Release : 2015
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Book Synopsis Default and the Maturity Structure in Sovereign Bonds by : Cristina Arellano

Download or read book Default and the Maturity Structure in Sovereign Bonds written by Cristina Arellano. This book was released on 2015. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the maturity composition and the term structure of interest rate spreads of government debt in emerging markets. In the data, when interest rate spreads rise, debt maturity shortens and the spread on short-term bonds is higher than on long-term bonds. To account for this pattern, we build a dynamic model of international borrowing with endogenous default and multiple maturities of debt. Short-term debt can deliver higher immediate consumption than long-term debt; large long-term loans are not available because the borrower cannot commit to save in the near future towards repayment in the far future. However, issuing long-term debt can insure against the need to roll-over short-term debt at high interest rate spreads. The trade-off between these two benefits is quantitatively important for understanding the maturity composition in emerging markets. When calibrated to data from Brazil, the model matches the dynamics in the maturity of debt issuances and its co-movement with the level of spreads across maturities.

Parameterizing Debt Maturity

2021-04-23 Business & Economics
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Release : 2021-04-23
Genre : Business & Economics
Kind : eBook
Book Rating : 518/5 ( reviews)

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Book Synopsis Parameterizing Debt Maturity by : Mr. Philip Barrett

Download or read book Parameterizing Debt Maturity written by Mr. Philip Barrett. This book was released on 2021-04-23. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines ways to summarize the maturity structure of public debts using a small number of parameters. We compile a novel dataset of all promised future payments for US and UK government debt from every month since 1869, and more recently for Peru, Poland, Egypt, and Nigeria. We show that there is a unique parametric form which does not arbitrarily restrict debt issuance – portfolios of bonds with exponential coupons. Compared to the most popular alternative, this form 1) more accurately describes changes in debt maturity for these six countries and 2) gives a quite different interpretation of historical debt maturity. Our work can be applied not just to analyze past debt movements, but – because parameter estimates are relatively similar across countries – also for monitoring changes in debt maturity, including in countries where data are partial or incomplete.

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