Optimal Maturity Structure of Sovereign Debt in Situation of Near Default is popular PDF and ePub book, written by Gabriel Desgranges in 2014-09-12, it is a fantastic choice for those who relish reading online the Business & Economics genre. Let's immerse ourselves in this engaging Business & Economics book by exploring the summary and details provided below. Remember, Optimal Maturity Structure of Sovereign Debt in Situation of Near Default can be Read Online from any device for your convenience.
Optimal Maturity Structure of Sovereign Debt in Situation of Near Default Book PDF Summary
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.
Detail Book of Optimal Maturity Structure of Sovereign Debt in Situation of Near Default PDF
- Author : Gabriel Desgranges
- Release : 12 September 2014
- Publisher : International Monetary Fund
- ISBN : 9781498330435
- Genre : Business & Economics
- Total Page : 43 pages
- Language : English
- PDF File Size : 21,9 Mb
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