Sovereign Bond Prices, Haircuts and Maturity

Dirk Niepelt

Diskussionsschriften from Universitaet Bern, Departement Volkswirtschaft

Abstract: Rejecting a common assumption in the sovereign debt literature, we document that creditor losses ("haircuts") during sovereign restructuring episodes are asymmetric across debt instruments. We code a comprehensive dataset on instrument-specific haircuts for 28 debt restructurings with private creditors in 1999-2015 and find that haircuts on shorter-term debt are larger than those on debt of longer maturity. In a standard asset pricing model, we show that increasing short-run default risk in the run-up to a restructuring episode can explain the stylized fact. The data confirms the predicted relation between perceived default risk, bond prices, and haircuts by maturity.

JEL-codes: F34 F41 H63 (search for similar items in EconPapers)
Date: 2017-09
New Economics Papers: this item is included in nep-opm
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Citations: View citations in EconPapers (21)

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Related works:
Journal Article: Sovereign bond prices, haircuts and maturity (2023)
Working Paper: Sovereign Bond Prices, Haircuts and Maturity (2022)
Working Paper: Sovereign Bond Prices, Haircuts and Maturity (2017)
Working Paper: Sovereign Bond Prices, Haircuts and Maturity (2017)
Working Paper: Sovereign Bond Prices, Haircuts and Maturity (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:ube:dpvwib:dp1703

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