AbstractI develop a model of secondary market pricing of sovereign debt when the creditors can reduce the debt. The sovereign obtains a stochastic revenue flow from the external sector and have a constant debt flow obligation. Default is costly for both the sovereign and the creditors and the possibility to reduce debt creates a surplus. The creditors can capture this surplus only if they can continuously adjust the debt flow.
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Bibliographic InfoPaper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 459.
Length: 40 pages
Date of creation: 1996
Date of revision:
PRICING; DEBT; ECONOMIC MODELS;
Other versions of this item:
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
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