Sovereign Debt Maturity Structure and Dilution
File
Date
2023-10-31
Authors
Hasan, Mohammad
Major Professor
Advisor
Committee Member
Journal Title
Journal ISSN
Volume Title
Publisher
Research Projects
Journal Issue
Series
23007
Department
Abstract
The maturity structure of debt plays an important role in default probability and the resulting pricing of sovereign bonds. Using a calibrated model this paper shows that both the default probabilities and the prices get improved when the sovereign issues long-term bonds or both short- and long-term bonds instead of issuing only short-term bonds. This paper also shows that the inclusion of the compensation covenant mitigates the dilution problem of sovereign debt on a larger scale when the maturity of long-term bonds is sufficiently high.
Comments
JEL Classification: F34, H63
Length: 47 pages
Original Release Date: October 31, 2023
Copyright 2023, The Authors