scholarly journals Debt Dilution and Seniority in a Model of Defaultable Sovereign Debt

2013 ◽  
Author(s):  
Satyajit Chatterjee ◽  
Burcu Eyigungor
Keyword(s):  
Sovereign Debt ◽  
Debt Dilution

scholarly journals A Seniority Arrangement for Sovereign Debt

2015 ◽  
Vol 105 (12) ◽  
pp. 3740-3765 ◽  
Author(s):  
Satyajit Chatterjee ◽  
Burcu Eyigungor
Keyword(s):  
Sovereign Debt ◽  
Realistic Model ◽  
Priority Rule ◽  
Debt Contracts ◽  
Absolute Priority ◽  
Course Of Action ◽  
The Absolute ◽  
Debt Dilution ◽  
Normative Implications

A sovereign’s inability to commit to a course of action regarding future borrowing and default behavior makes long-term debt costly (the problem of debt dilution). One mechanism to mitigate this problem is the inclusion of a seniority clause in debt contracts. In the event of default, creditors are to be paid off in the order in which they lent (the “absolute priority” or “first-in-time” rule). In this paper, we propose a modification of the absolute priority rule suited to sovereign debts contracts and analyze its positive and normative implications within a quantitatively realistic model of sovereign debt and default. (JEL E32, E44, F34, G15, H63, O16, O19)

scholarly journals Sovereign Debt Restructurings

2021 ◽  
Vol 13 (2) ◽  
pp. 26-77
Author(s):  
Maximiliano Dvorkin ◽  
Juan M. Sánchez ◽  
Horacio Sapriza ◽  
Emircan Yurdagul
Keyword(s):  
Economic Theory ◽  
Discrete Choice ◽  
Sovereign Debt ◽  
Decision Rules ◽  
Dynamic Discrete Choice ◽  
Debt Restructuring ◽  
Book Value ◽  
Regulatory Costs ◽  
Debt Crises ◽  
Debt Dilution

Sovereign debt crises involve debt restructurings characterized by a mix of face value haircuts and maturity extensions. The prevalence of maturity extensions has been hard to reconcile with economic theory. We develop a model of endogenous debt restructuring that captures key facts of sovereign debt and restructuring episodes. While debt dilution pushes for negative maturity extensions, three factors are important in overcoming the effects of dilution and generating maturity extensions upon restructurings: income recovery after default, credit exclusion after restructuring, and regulatory costs of book value haircuts. We employ dynamic discrete choice methods that allow for smoother decision rules, rendering the problem tractable. (JEL E44, F34, F41, H63)

scholarly journals Debt Dilution and Seniority in a Model of Defaultable Sovereign Debt

2012 ◽  
Author(s):  
Satyajit Chatterjee ◽  
Burcu Eyigungor
Keyword(s):  
Sovereign Debt ◽  
Debt Dilution

Lending to the Borrower from Hell

2017 ◽  
Author(s):  
Mauricio Drelichman ◽  
Hans-Joachim Voth
Keyword(s):  
United States ◽  
Sixteenth Century ◽  
Sovereign Debt ◽  
Risk Sharing ◽  
The United States ◽  
Philip Ii ◽  
Loan Contracts ◽  
The Right ◽  
Intelligent Model ◽  
New Evidence

Why do lenders time and again loan money to sovereign borrowers who promptly go bankrupt? When can this type of lending work? As the United States and many European nations struggle with mountains of debt, historical precedents can offer valuable insights. This book looks at one famous case—the debts and defaults of Philip II of Spain. Ruling over one of the largest and most powerful empires in history, King Philip defaulted four times. Yet he never lost access to capital markets and could borrow again within a year or two of each default. Exploring the shrewd reasoning of the lenders who continued to offer money, the book analyzes the lessons from this historical example. Using detailed new evidence collected from sixteenth-century archives, the book examines the incentives and returns of lenders. It provides powerful evidence that in the right situations, lenders not only survive despite defaults—they thrive. It also demonstrates that debt markets cope well, despite massive fluctuations in expenditure and revenue, when lending functions like insurance. The book unearths unique sixteenth-century loan contracts that offered highly effective risk sharing between the king and his lenders, with payment obligations reduced in bad times. A fascinating story of finance and empire, this book offers an intelligent model for keeping economies safe in times of sovereign debt crises and defaults.

European Economies Stability Faced With Potential Outburst of Sovereign Debt Crisis. An Empirical Study Using Neural Network

2013 ◽  
Vol 12 (2) ◽  
pp. 3255-3260
Author(s):  
Stelian Stancu ◽  
Alexandra Maria Constantin
Keyword(s):  
Neural Network ◽  
Sovereign Debt ◽  
Debt Crisis ◽  
Banking System ◽  
Sovereign Debt Crisis ◽  
European Level ◽  
Continuous Growth ◽  
Economic Context ◽  
European Economies ◽  
The Impact

Instilment, on a European level, of a state incompatible with the state of stability on a macroeconomic level and in the financial-banking system lead to continuous growth of vulnerability of European economies, situated at the verge of an outburst of sovereign debt crises. In this context, the current papers main objective is to produce a study regarding the vulnerability of European economies faced with potential outburst of sovereign debt crisis, which implies quantitative analysis of the impact of sovereign debt on the sensitivity of the European Unions economies. The paper also entails the following specific objectives: completing an introduction in the current European economic context, conceptualization of the notion of “sovereign debt crisis, presenting the methodology and obtained empirical results, as well as exposition of the conclusions.

Choosing the "Plus" in Core-Plus: The Cases for High-Yield Bonds, Emerging Market Debt, and Sovereign Debt

2001 ◽  
Vol 2001 (1) ◽  
pp. 60-79
Author(s):  
Barry Coffman ◽  
Ismail Dalla ◽  
Kenneth Windheim
Keyword(s):  
Sovereign Debt ◽  
Emerging Market ◽  
High Yield

The Kiss of Death: IMF Subsidies in Sovereign Debt Markets

1999 ◽  
Author(s):  
Duane W. Rockerbie ◽  
Stephen T. Easton
Keyword(s):  
Sovereign Debt ◽  
Debt Markets
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