Debt Sustainability Measures and Their Explanatory Power for Estimating Government Bond Yields

28 Pages Posted: 31 May 2012 Last revised: 2 Jun 2012

See all articles by Michael Markovich

Michael Markovich

QIO Quantitative Investment Office; Vienna Institute of Finance

Date Written: August 30, 2011

Abstract

The purpose of this article is to explain changes in sovereign yields using conventional “rating agency style” measures in comparison to contingent claims valuation-based measures. I will show that – in contrast to most conventional sovereign credit quality measures – contingent claims valuation-based credit measures have significant power in explaining the spread between 10-year sovereign yields and the expected future monetary policy rate.

Keywords: Sovereign debt, debt sustainability, contingent claims approach, sovereign long-term interest rates, dynamic panel models

JEL Classification: C23, E62, F34, G13, H63

Suggested Citation

Markovich, Michael, Debt Sustainability Measures and Their Explanatory Power for Estimating Government Bond Yields (August 30, 2011). Available at SSRN: https://ssrn.com/abstract=2071389 or http://dx.doi.org/10.2139/ssrn.2071389

Michael Markovich (Contact Author)

QIO Quantitative Investment Office ( email )

Böndlerstrasse 63
Kilchberg, 8802
Switzerland
+41788686350 (Phone)

Vienna Institute of Finance ( email )

Nordbergstrasse 15
Vienna, 1090
Austria

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
55
Abstract Views
577
rank
459,118
PlumX Metrics