Contingent Claims Analysis of Sovereign Debt Sustainability in Asian Emerging Markets
Contingent claims analysis applied to Indonesia, Malaysia, the Philippines, the Republic of Korea, and Thailand shows no particular vulnerability to sovereign debt distress during recent years. However, the highly volatile “distance to distress” measure suggests that any of these countries may fall victim to a sudden loss in market confidence. For example, the value of Indonesia’s sovereign assets dropped to just two standard deviations above its repayment obligations during the 2013 United States Federal Reserve taper tantrum, causing capital outflows and currency depreciation. Generally, we find that contingent claims analysis and market-based risk measures well complement conventional debt sustainability analysis for Asia.
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- Sturzenegger, Federico & Zettelmeyer, Jeromin, 2008.
"Haircuts: Estimating investor losses in sovereign debt restructurings, 1998-2005,"
Journal of International Money and Finance,
Elsevier, vol. 27(5), pages 780-805, September.
- Jeronimo Zettelmeyer & Federico Sturzenegger, 2005. "Haircuts; Estimating Investor Losses in Sovereign Debt Restructurings, 1998-2005," IMF Working Papers 05/137, International Monetary Fund.
- Federico Sturzenegger and Jeromin Zettelmeyer, 2006. "Haircuts: Estimating Investors Losses in Sovereign Debt Restructurings, 1998-2005," Business School Working Papers 2006-02, Universidad Torcuato Di Tella.
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