Modeling Sovereign Yield Spreads: A Case Study of Russian Debts

50 Pages Posted: 3 Nov 2008  

Darrell Duffie

Stanford University

Lasse Heje Pedersen

AQR Capital Management, LLC; Copenhagen Business School - Department of Finance; New York University (NYU); Centre for Economic Policy Research (CEPR)

Kenneth J. Singleton

Stanford University - Graduate School of Business

Date Written: September 2001

Abstract

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.

Suggested Citation

Duffie, Darrell and Pedersen, Lasse Heje and Singleton, Kenneth J., Modeling Sovereign Yield Spreads: A Case Study of Russian Debts (September 2001). NYU Working Paper No. FIN-01-021. Available at SSRN: https://ssrn.com/abstract=1294488

Darrell Duffie (Contact Author)

Stanford University

Stanford, CA 94305
United States

Lasse Heje Pedersen

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

Copenhagen Business School - Department of Finance ( email )

Solbjerg Plads 3
Frederiksberg, DK-2000
Denmark

New York University (NYU) ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Kenneth J. Singleton

Stanford University - Graduate School of Business ( email )

Knight Management Center
655 Knight Way
Stanford, CA 94305-7298
United States
650-723-5753 (Phone)

HOME PAGE: http://www.stanford.edu/~kenneths

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