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Sovereign Default Risk Valuation

Implications of Debt Crises and Bond Restructurings

  • Book
  • © 2006

Overview

Authors:
  1. Jochen Andritzky

    1. McLean, USA

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

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Table of contents (7 chapters)

  1. Front Matter

    Pages I-XI
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  2. Introduction

    Pages 1-14

  3. Sovereign Lending and Default

    Pages 15-60

  4. Sovereign Restructuring

    Pages 61-107

  5. Modeling Sovereign Default Risk

    Pages 109-152

  6. Empirical Estimations

    Pages 153-198

  7. Credit Default Swaps

    Pages 199-221

  8. Conclusion

    Pages 223-228

  9. Back Matter

    Pages 229-254
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Keywords

About this book

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.

Authors and Affiliations

  • McLean, USA

    Jochen Andritzky

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