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A valuation formula for LDC debt

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  • Cohen, Daniel

Abstract

This paper gives a valuation formula for LDC debt that is used to assess: i) the price at which a buy-back of the debt is advantageous to the country (we shall see that it is likely to be half the observed market price); ii) the value to the creditors of having the flows of payment guaranteed against the extrinsic stochastic disturbance faced by the country (we shall see that it may not exceed 25%); iii) the trade-off between growth of payments and levels of payments (we show that a 1% additional growth rate is worth a 15% increase of the flows). We offer finally an assessment of the Mexican agreement reached in early 1990.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

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  • Cohen, Daniel, 1993. "A valuation formula for LDC debt," Journal of International Economics, Elsevier, vol. 34(1-2), pages 167-180, February.
    • Handle: RePEc:eee:inecon:v:34:y:1993:i:1-2:p:167-180
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    1. Claessens, Stijn & van Wijnbergen, Sweder, 1990. "Secondary Market Prices Under Alternative Debt Reduction Schemes: An Option Pricing Approach with an Application to Mexico," CEPR Discussion Papers 415, C.E.P.R. Discussion Papers.
    2. Michael P. Dooley, 1988. "Buy-Backs and Market Valuation of External Debt," IMF Staff Papers, Palgrave Macmillan, vol. 35(2), pages 215-229, June.
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    1. Kim Oosterlinck & Loredana Ureche-Rangau, 2004. "Entre la peste et le choléra: le détenteur d'obligations peut préférer la répudiation au défaut," Working Papers CEB 04-021.RS, ULB -- Universite Libre de Bruxelles.
    2. Dongchul Cho & Kiseok Hong, 2001. "Currency Crisis of Korea: Internal Weakness or External Interdependence?," NBER Chapters, in: Regional and Global Capital Flows: Macroeconomic Causes and Consequences, pages 337-373, National Bureau of Economic Research, Inc.
    3. Miller, Marcus & Zhang, Lei, 2000. "Sovereign Liquidity Crises: The Strategic Case for a Payments Standstill," Economic Journal, Royal Economic Society, vol. 110(460), pages 335-362, January.
    4. van Wijnbergen, Sweder, 1990. "Mexico's external debt restructuring in 1989-90," Policy Research Working Paper Series 424, The World Bank.
    5. Hayri, Aydin, 2000. "Debt relief," Journal of International Economics, Elsevier, vol. 52(1), pages 137-152, October.
    6. Claessens, Stijn & van Wijnbergen, Sweder, 1990. "An option - pricing approach to secondary market debt : applied to Mexico," Policy Research Working Paper Series 333, The World Bank.
    7. Pascal François & Georges Hübner & Jean-Roch Sibille, 2011. "A Structural Balance Sheet Model of Sovereign Credit Risk," Finance, Presses universitaires de Grenoble, vol. 32(2), pages 137-165.
    8. Kim Oosterlinck & Loredana Ureche-Rangau, 2005. "Entre la peste et le choléra : le détenteur d’obligations peut préférer la répudiation au défaut…," Revue d'Économie Financière, Programme National Persée, vol. 79(2), pages 309-331.
    9. Ramcharran, Harri, 1999. "The determinants of secondary market prices for developing country loans: the impact of country risk," Global Finance Journal, Elsevier, vol. 10(2), pages 173-186.

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