Debt Valuation: An Alternative Method to Avoid Future Default

Thomas Poufinas () and Evaggelos Drimpetas
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Thomas Poufinas: Democritus University of Thrace
Evaggelos Drimpetas: Democritus University of Thrace

Chapter Chapter 1 in Debt in Times of Crisis, 2021, pp 1-53 from Springer

Abstract: Abstract Public debt has been troubling and troubles the governments of the countries, particularly those that in the recent years had fragile economies, some of which needed support programs such as Greece, Portugal, Cyprus and Ireland or Spain and Italy. The concern of governments and European authorities was to calculate the debt, in terms of GDP, its serviceability and sustainability, and its repayment in such a way that would mitigate the risk of future default. This study aims at assessing the debt of a country by taking into account the probability of future default. It uses actuarial techniques to estimate a burning cost similar to the one of life insurance protection schemes. The approach used in this study indirectly prices the debt through the calculation of the reserve needed to avoid the default of a country.

Keywords: Debt; Pricing; Actuarial; Reserve; Default (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-74162-4_1

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DOI: 10.1007/978-3-030-74162-4_1

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