Citation

Discussion Paper Details

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Title: Securitization and Commodity Contingency in International Lending

Author(s): Ronald W. Anderson and Christopher L Gilbert

Publication Date: April 1989

Keyword(s): Debt, Developing Countries, Securitization and Sovereign Risk

Programme Area(s): International Trade and Regional Economics

Abstract: Securitization of LDC debt would significantly aid the international debt problem by increasing liquidity and expanding the range of investors. Securitization is problematic, however, in large part due to sovereign risks involved. At present sovereign risks, commodity price risks and currency risks remain unbundled in general obligation loan contracts. Using a game theoretic model we illustrate the need to separate sovereign risks from other risks and associate the sovereign default with a third party guarantee, whose fair-value premium can be calculated. We argue that issuing commodity price contingent assets may provide the best means of securitizing LDC obligations.

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Bibliographic Reference

Anderson, R and Gilbert, C. 1989. 'Securitization and Commodity Contingency in International Lending'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=295