Emerging Market Debt: Measuring Credit Quality and Examining Relative Pricing

Robert Cumby () and Tuvana Pastine

No 2866, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We investigate the pricing of ?Brady? bonds that are issued by the governments of five developing countries as part of debt and debt service reduction agreements. We first present a measure of credit quality that takes account of the individual features of each bond and is comparable across bonds, across issuers, and over time. We then examine the evolution of the credit quality of each debt instrument from 1990 until the beginning of 2000. Next, we present evidence of a profitable trading strategy that exploits the information contained in this measure of credit quality.

Keywords: Default risk; Mispricing; Market efficiency; Sovereign debt; Brady bonds (search for similar items in EconPapers)
JEL-codes: F32 F34 G14 G15 (search for similar items in EconPapers)
Date: 2001-06
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Citations: View citations in EconPapers (9)

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Related works:
Journal Article: Emerging market debt: measuring credit quality and examining relative pricing (2001)
Working Paper: Emerging Market Debt: Measuring Credit Quality and Examining Relative Pricing (2000)
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