Considerations in the Choice of the Appropriate Discount Rate for Evaluating Sovereign Debt Restructurings
AbstractAssessments regarding the effectiveness of sovereign debt restructurings are often summarized by comparisons of the net present value of debt service before and after the restructuring. These calculations are inherently sensitive to the choice of discount rate. This paper explores issues that arise in selecting discount rates when evaluating sovereign debt restructurings. It suggests using a range of discount rates and centering the analysis around the internal rate of return to assess whether the debt restructuring has generated net present value savings or costs to the debtor.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Policy Discussion Papers with number 05/09.
Date of creation: 01 Dec 2005
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-07-03 (All new papers)
- NEP-CFN-2006-07-05 (Corporate Finance)
- NEP-FMK-2006-07-20 (Financial Markets)
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