Modeling Sovereign Yield Spreads: A Case Study of Russian Debts
affiliation not provided to SSRN
Lasse Heje Pedersen
New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER)
Kenneth J. Singleton
Stanford University-Graduate School of Business
NYU Working Paper No. FIN-01-021
We construct a model for pricing sovereign debt that accounts for the risks of both default and restructuring, and allows for compensation for illiquidity. Using a new and relatively efficient method, we estimate the model using Russian dollar-denominated bonds. We consider the determinants of the Russian yield spread, the yield differentialacross different Russian bonds, and the implications for market integration, relative liquidity, relative expected recovery rates, and implied expectations of different default scenarios.
Number of Pages in PDF File: 50working papers series
Date posted: November 3, 2008
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