Brady Bonds and Default Probabilities /

This paper computes the default probabilities implicit in the prices of Brady bonds of seven developing countries and examines the factors that determine the high cross-correlation of the probability paths. The term structure of U.S. interest rates and the ratio of long-term foreign debt to GDP, tog...

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Bibliografiske detaljer
Hovedforfatter: Izvorski, Ivailo
Format: Tidsskrift
Sprog:English
Udgivet: Washington, D.C. : International Monetary Fund, 1998.
Serier:IMF Working Papers; Working Paper ; No. 1998/016
Online adgang:Full text available on IMF
Beskrivelse
Summary:This paper computes the default probabilities implicit in the prices of Brady bonds of seven developing countries and examines the factors that determine the high cross-correlation of the probability paths. The term structure of U.S. interest rates and the ratio of long-term foreign debt to GDP, together with a developing market index, explain more than 75 percent of the cross-sectional distribution of the default probabilities. The paper also demonstrates a new way to extract sovereign riskiness, implicit in traded bond prices. This allows the above results to be interpreted as explaining the cross-sectional distribution of sovereign riskiness as well.
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Fysisk beskrivelse:1 online resource (24 pages)
Format:Mode of access: Internet
ISSN:1018-5941
Adgang:Electronic access restricted to authorized BRAC University faculty, staff and students