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dc.contributor.authorConsiglio, Andreaen
dc.contributor.authorZenios, Stavros A.en
dc.creatorConsiglio, Andreaen
dc.creatorZenios, Stavros A.en
dc.description.abstractWe consider convertible bonds that contractually stipulate payment standstill, contingent on a market indicator of a sovereign's creditworthiness breaching a distress threshold. This financial innovation limits ex-ante the likelihood of debt crises and imposes ex-post risk sharing between creditors and the debtor. Drawing from literature on contingent contracts, neglected risks, and bank CoCo, we extend prevailing arguments in favor of sovereign CoCo (S-CoCo). We discuss issues relating to their design: which market trigger, market discipline and sovereign incentives, and errors of false alarms or missed crises, and provide supporting evidence with eurozone data and a simple simulation on the use of S-CoCo. We develop a risk management model using these instruments to trade off the expected cost for sovereign financing over a long horizon, with tail risk. The model shows how contingent bonds can improve a country's debt risk profile. Using Greece as a case study the model illustrates improvements in expected cost vs tail risk for the country when using contingent debt.en
dc.format.extent32 p.
dc.publisherThe Wharton Financial Institutions Center. The Wharton School, University of Pennsylvania, PA.en
dc.rightsAttribution-NonCommercial-NoDerivs 3.0 Greece*
dc.rightsOpen Accessen
dc.sourceJournal of Globalization and Developmenten
dc.subjectContingent debten
dc.subjectSovereign crisesen
dc.subjectCDS spreadsen
dc.subjectDebt restructuringen
dc.subjectRisk managementen
dc.titleContingent convertible bonds for sovereign debt risk managementen
dc.identifier.doi10.2139/ssrn.2694973Σχολή Οικονομικών Επιστημών και Διοίκησης / Faculty of Economics and ManagementΤμήμα Λογιστικής και Χρηματοοικονομικής / Department of Accounting and Finance
dc.type.uhtypeWorking Paperen
dc.contributor.orcidZenios, Stavros A. [0000-0001-7576-4898]
dc.contributor.orcidConsiglio, Andrea [0000-0003-1654-9172]

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Attribution-NonCommercial-NoDerivs 3.0 Greece
Except where otherwise noted, this item's license is described as Attribution-NonCommercial-NoDerivs 3.0 Greece