6533b82ffe1ef96bd1296521
RESEARCH PRODUCT
Risk Profiles for Re-Profiling the Sovereign Debt of Crisis Countries
Andrea ConsiglioStavros A. Zeniossubject
Economic policyRestructuringRisk measureDebtmedia_common.quotation_subjectDebt-to-GDP ratioRecourse debtEconomicsInternal debtMonetary economicsDebt levels and flowsExternal debtmedia_commondescription
This paper uses a risk-management approach to re-profile the sovereign debt of countries facing debt crises. Using scenario analysis we develop a risk measure of the sovereign's debt -- Conditional Debt-at-Risk -- and an optimization model is used to trace risk profiles that tradeoff expected cost of debt financing against the Conditional Debt-at-Risk. The risk profiles are particularly informative for crisis countries, as they allow us to identify, with high-probability, debt unsustainability. We develop risk profiles for two Eurozone countries with excessive debt, Cyprus and Italy, both in their current form and under various forms of restructuring or rescheduling, and show how to assess debt sustainability. We also develop the risk profiles for a proposal to impose "debt sanctions" in the Ukrainian crisis and show that the (financial) impact could be substantial.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2014-01-01 | SSRN Electronic Journal |