The Premia on State-Contingent Sovereign Debt Instruments

State-contingent debt instruments such as GDP-linked warrants have garnered attention as a potential tool to help debt-stressed economies smooth repayments over business cycles, yet very few studies of the empirical properties of these instruments exist. This paper develops a general f ramework to e...

Full description

Bibliographic Details
Main Author: Igan, Deniz
Other Authors: Kim, Taehoon, Levy, Antoine
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2021
Series:IMF Working Papers
Subjects:
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
LEADER 03119nmm a2200709 u 4500
001 EB002082309
003 EBX01000000000000001222399
005 00000000000000.0
007 cr|||||||||||||||||||||
008 220928 ||| eng
020 |a 9781616357009 
100 1 |a Igan, Deniz 
245 0 0 |a The Premia on State-Contingent Sovereign Debt Instruments  |c Deniz Igan, Taehoon Kim, Antoine Levy 
260 |a Washington, D.C.  |b International Monetary Fund  |c 2021 
300 |a 48 pages 
651 4 |a Ukraine 
653 |a Sovereign bonds 
653 |a Finance 
653 |a Securities 
653 |a Intangible Capital 
653 |a option pricing 
653 |a Liquidity; Economics 
653 |a Economics of specific sectors 
653 |a Futures Pricing 
653 |a Currency crises 
653 |a Bonds 
653 |a Macroeconomics 
653 |a Debt restructuring 
653 |a Capacity 
653 |a Capital 
653 |a Financial Risk Management 
653 |a Investment Decisions 
653 |a Economic & financial crises & disasters 
653 |a Investment 
653 |a Financial institutions 
653 |a Contingent Pricing 
653 |a Economics: General 
653 |a Debt Management 
653 |a Debt 
653 |a Informal sector; Economics 
653 |a General Financial Markets: General (includes Measurement and Data) 
653 |a Investments: Bonds 
653 |a Asset and liability management 
653 |a Debts, External 
653 |a Liquidity 
653 |a Sovereign Debt 
653 |a Saving and investment 
653 |a Financial instruments 
653 |a Investments: General 
653 |a Financial Markets and the Macroeconomy 
653 |a Investment & securities 
653 |a Finance: General 
653 |a Portfolio Choice 
700 1 |a Kim, Taehoon 
700 1 |a Levy, Antoine 
041 0 7 |a eng  |2 ISO 639-2 
989 |b IMF  |a International Monetary Fund 
490 0 |a IMF Working Papers 
028 5 0 |a 10.5089/9781616357009.001 
856 4 0 |u https://elibrary.imf.org/view/journals/001/2021/282/001.2021.issue-282-en.xml?cid=510780-com-dsp-marc  |x Verlag  |3 Volltext 
082 0 |a 330 
520 |a State-contingent debt instruments such as GDP-linked warrants have garnered attention as a potential tool to help debt-stressed economies smooth repayments over business cycles, yet very few studies of the empirical properties of these instruments exist. This paper develops a general f ramework to estimate the time-varying risk premium of a state-contingent sovereign debt instrument. Our estimation framework applied to GDP-linked warrants issued by Argentina, Greece, and Ukraine reveals three stylized facts: (i) the risk premium in state-contingent instruments is high and persistent; (ii) the risk premium exhibits a pro-cyclical pattern; and (iii) the liquidity premium is higher and more volatile than that for plain-vanilla government bonds issued by the same sovereign. We then present a model in which investors fear ambiguity and that can account for the cyclical properties of the risk premium