This paper analyses the hedging decisions of an emerging economy which is exposed to market risks and whose debt contract is subject to collateral constraints. Within a sovereign debt model with default risk and endogenous collateral, we study the optimal choice of hedging instruments when both futures and non-linear derivatives are available. We examine in which way the hedging policy is affected by the cost of default and the financial constraints of the economy and provide some implications in terms of resource allocation. JEL: D84, E32, E40, F30, G15, G28, G32
Collateral Constraints, Debt Management and Investment Incentives / E. Agliardi; R. Andergassen. - STAMPA. - (2008), pp. 1-13. [10.1142/9789812791696_0001]
Collateral Constraints, Debt Management and Investment Incentives
AGLIARDI, ELETTRA;ANDERGASSEN, RAINER
2008
Abstract
This paper analyses the hedging decisions of an emerging economy which is exposed to market risks and whose debt contract is subject to collateral constraints. Within a sovereign debt model with default risk and endogenous collateral, we study the optimal choice of hedging instruments when both futures and non-linear derivatives are available. We examine in which way the hedging policy is affected by the cost of default and the financial constraints of the economy and provide some implications in terms of resource allocation. JEL: D84, E32, E40, F30, G15, G28, G32I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
