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Review of Economics

Jahrbuch für Wirtschaftswissenschaften

Editor-in-Chief: Berlemann, Michael

Ed. by Haucap, Justus / Thum, Marcel

3 Issues per year

Online
ISSN
2366-035X
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A Structural Approach to Estimate Short-Term and Long-Term Country Default Risk from Market Data: The Case of Argentina 2000/2001

Dominik Maltritz
  • University of Erfurt, Faculty of Economics, Law and Social Sciences, Nordhäuser Straße 63,Erfurt D-99089, Germany
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Published Online: 2016-02-11 | DOI: https://doi.org/10.1515/roe-2013-0103

Abstract

We apply a structural pricing model to bond market data in order to estimate the default risk for Argentina in 2000/2001. The model explicitly considers short-term and long-term debt service payments and their dependencies by employing compound option theory. In this way, it is possible to take into account both the empirically observed dependency between the term structure of bond spreads and the default risk as well as the finding that the ratio of short-term to long-term debt is of special importance for default risk. The model parameters are estimated using Duan’s (1994) time series-based maximum likelihood approach.

Keywords: Sovereign default risk; Term structure; Yield spreads; structural credit risk model; compound option theory

About the article

Published Online: 2016-02-11

Published in Print: 2013-04-01



Citation Information: Review of Economics, ISSN (Online) 2366-035X, ISSN (Print) 0948-5139, DOI: https://doi.org/10.1515/roe-2013-0103. Export Citation

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