Contingent Claims Analysis of Sovereign Debt Sustainability in Asian Emerging Markets

Marie Brière (), Benno Ferrarini () and Arief Ramayandi
Additional contact information
Marie Brière: Paris Dauphine University
Benno Ferrarini: Asian Development Bank

No 486, ADB Economics Working Paper Series from Asian Development Bank

Abstract: 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.

Keywords: contingent claims analysis; public debt sustainability (search for similar items in EconPapers)
JEL-codes: E60 F34 G13 H63 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2016-06-09
New Economics Papers: this item is included in nep-sea
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Citations: View citations in EconPapers (4)

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