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One Asset, Two Prices: The case of the Tsarist Repudiated Bonds

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Author Info
Kim Oosterlinck () (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels.)
Ariane Szafarz () (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels and DULBEA, Université Libre de Bruxelles)

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Abstract

Prices of repudiated bonds are insightful but scarcely observed. Based on an original daily database, this paper compares the price evolution from January 6, 1916 to August 31, 1919 of a cross-listed (Paris and London) Tsarist bond repudiated by the Soviets on February 8, 1918. After its repudiation, the bond exhibits an important geographic price differential. This phenomenon is attributed to the conjunction of war conditions excluding arbitrage and specific investors' expectations regarding bailouts by the French and British governments. Furthermore, data from the pre-repudiation period show that the impossibility for arbitrage is not sufficient for driving the pricing differences.

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File URL: http://www.solvay.edu/EN/Research/Bernheim/documents/wp04022.pdf
File Format: application/pdf
File Function: First version, 2004-08
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Publisher Info
Paper provided by Université Libre de Bruxelles, Solvay Business School, Centre Emile Bernheim (CEB) in its series Working Papers CEB with number 04-022.RS.

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Length: 15 pages
Date of creation: Aug 2004
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Handle: RePEc:sol:wpaper:04-022

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Related research
Keywords: Bonds repudiation sovereign debt Russia.

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Find related papers by JEL classification:
F34 - International Economics - - International Finance - - - International Lending and Debt Problems
G1 - Financial Economics - - General Financial Markets
N24 - Economic History - - Financial Markets and Institutions - - - Europe: 1913-

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  1. Waldenström, Daniel, 2005. "Does Sovereign Risk Differ for Domestic and Foreign Investors? Historical Evidence from Scandinavian Bond Markets," Working Paper Series in Economics and Finance 585, Stockholm School of Economics, revised 18 Feb 2005. [Downloadable!]
  2. John Landon-Lane & Kim Oosterlinck, 2005. "Hope springs eternal… French bondholders and the Soviet Repudiation (1915-1919)," Departmental Working Papers 200513, Rutgers University, Department of Economics. [Downloadable!]
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