Citation

Discussion Paper Details

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Full Details

Title: Emerging Market Debt: Measuring Credit Quality and Examining Relative Pricing

Author(s): Robert Cumby and Tuvana Pastine

Publication Date: June 2001

Keyword(s): brady bonds, default risk, market efficiency, mispricing and sovereign debt

Programme Area(s): International Macroeconomics

Abstract: We investigate the pricing of ?Brady? bonds that are issued by the governments of five developing countries as part of debt and debt service reduction agreements. We first present a measure of credit quality that takes account of the individual features of each bond and is comparable across bonds, across issuers, and over time. We then examine the evolution of the credit quality of each debt instrument from 1990 until the beginning of 2000. Next, we present evidence of a profitable trading strategy that exploits the information contained in this measure of credit quality.

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Bibliographic Reference

Cumby, R and Pastine, T. 2001. 'Emerging Market Debt: Measuring Credit Quality and Examining Relative Pricing'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2866