Market prices of developing country debt reflect investors' views of country repayment capacity as well as other debt-specific factors. To extract a measure of repayment capacity from debt prices, adjustments need to be made to account for: debt values being a concave function of repayment capacity; the specific terms of the debt agreement; and the presence of third-party guarantees. This paper derives a measure of repayment capacity by constructing a pricing model that takes these factors into account. Applying the model to Brady bonds issued by Mexico, we find that estimated repayment capacity often performs differently from the unadjusted bond prices. We demonstrate that other Mexican bonds can be priced fairly accurately on the basis of this repayment capacity measure.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Volume (Year): 31 (1996) Issue (Month): 01 (March) Pages: 109-126 Download reference. The following formats are available: HTML
(with abstract),
plain text
(with abstract),
BibTeX,
RIS (EndNote, RefMan, ProCite),
ReDIF
Contact details of provider: Postal: The Edinburgh Building, Shaftesbury Road, Cambridge CB2 2RU UK Fax: +44 (0)1223 325150 Email: Web page: http://journals.cambridge.org/jid_JFQ
For technical questions regarding this item, or to correct its listing, contact: (Mike Eden).
Related research
Keywords:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)