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Sovereign Default Risk Valuation Implications of Debt Crises and Bond Restructurings
Title:
Sovereign Default Risk Valuation Implications of Debt Crises and Bond Restructurings
Author:
Andritzky, Jochen. author.
ISBN:
9783540374497
Personal Author:
Physical Description:
XII, 251 p., 43 illus. online resource.
Series:
Lecture Notes in Economics and Mathematical Systems, 582
Contents:
Sovereign Lending and Default -- Sovereign Restructuring -- Modeling Sovereign Default Risk -- Empirical Estimations -- Credit Default Swaps -- Conclusion.
Abstract:
Past cycles of sovereign lending and default in emerging markets suggest that debt crises will recur at some point. In addressing debt crises it has proven helpful to distinguish between situations of illiquidity and insolvency. Solutions range from a voluntary debt swap to a soft or hard restructuring. This book shows why investors should reckon with similar credit events in the future. Insights gained from recent restructurings inspire the design of a valuation model for sovereign bonds. Using the distinction between hard and soft restructurings, the model draws parallels to the concepts of face value and market value recovery. An extension into credit default swap markets explains why bond and CDS spreads diverge during distress. This survey of the sovereign bond market provides investors with a useful toolkit for analyzing sovereign bonds and foreseeing trends in the international financial architecture. The result should be a better understanding of debt crises and more deliberate investment decisions.
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