One Asset, Two Prices: The Case of the Tsarist Repudiated Bonds

Centre Bernheim ULB Working Paper No. 04-022

15 Pages Posted: 22 Sep 2004

See all articles by Kim Oosterlinck

Kim Oosterlinck

Université Libre de Bruxelles - SBS-EM, CEB

Ariane Szafarz

Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB) & CERMi

Date Written: August 24, 2004

Abstract

Prices of repudiated bonds are insightful but scarcely observed. Based on an original daily database, this paper compares the price evolution from January 6, 1916 to August 31, 1919 of a cross-listed (Paris and London) Tsarist bond repudiated by the Soviets on February 8, 1918. After its repudiation, the bond exhibits an important geographic price differential. This phenomenon is attributed to the conjunction of war conditions excluding arbitrage and specific investors' expectations regarding bailouts by the French and British governments. Furthermore, data from the pre-repudiation period show that the impossibility for arbitrage is not sufficient for driving the pricing differences.

Keywords: Bonds, repudiation, sovereign debt, Russia

JEL Classification: F34, G1, N24

Suggested Citation

Oosterlinck, Kim and Szafarz, Ariane, One Asset, Two Prices: The Case of the Tsarist Repudiated Bonds (August 24, 2004). Centre Bernheim ULB Working Paper No. 04-022. Available at SSRN: https://ssrn.com/abstract=582041 or http://dx.doi.org/10.2139/ssrn.582041

Kim Oosterlinck (Contact Author)

Université Libre de Bruxelles - SBS-EM, CEB ( email )

50 Avenue Roosevelt, CP114/03
Brussels 1050
Belgium

Ariane Szafarz

Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB) & CERMi ( email )

50 Avenue Roosevelt
Brussels 1050
Belgium

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