Citation

Discussion Paper Details

Please find the details for DP415 in an easy to copy and paste format below:

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Title: Secondary Market Prices Under Alternative Debt Reduction Schemes: An Option Pricing Approach with an Application to Mexico

Author(s): Stijn Claessens and Sweder van Wijnbergen

Publication Date: April 1990

Keyword(s): Debt Market, Debt Restructuring, Foreign Exchange and Option Pricing

Programme Area(s): International Macroeconomics

Abstract: We present a pricing model for secondary market debt designed to assess the impact of debt reduction on valuation of remaining claims and to value guarantees in various forms. The technique used, option pricing, accounts explicitly for the sources and natures of risks on secondary market pricing and of the market value of various forms of guarantees. The method can handle different maturity schedules, expectations regarding foreign exchange availability and willingness to pay, and differences in seniority. The method is applied to an analysis and evaluation of the recent Mexico debt restructuring packa.

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Bibliographic Reference

Claessens, S and van Wijnbergen, S. 1990. 'Secondary Market Prices Under Alternative Debt Reduction Schemes: An Option Pricing Approach with an Application to Mexico'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=415