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Sovereign Default Risk Valuation

Implications of Debt Crises and Bond Restructurings

  • Jochen Andritzky

Part of the Lecture Notes in Economics and Mathematical Systems book series (LNE, volume 582)

Table of contents

  1. Front Matter
    Pages I-XI
  2. Pages 1-14
  3. Pages 153-198
  4. Pages 199-221
  5. Pages 223-228
  6. Back Matter
    Pages 229-254

About this book

Introduction

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.

Keywords

Bond Investment Credit Default Swaps Credit Risk Emerging Market Investment Sovereign Restructuring linear optimization

Authors and affiliations

  • Jochen Andritzky
    • 1
  1. 1.McLeanUSA

Bibliographic information

  • DOI https://doi.org/10.1007/978-3-540-37449-7
  • Copyright Information Springer Berlin Heidelberg 2006
  • Publisher Name Springer, Berlin, Heidelberg
  • eBook Packages Business and Economics
  • Print ISBN 978-3-540-37448-0
  • Online ISBN 978-3-540-37449-7
  • Series Print ISSN 0075-8442
  • Buy this book on publisher's site