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

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, G32
Advances in quantitative analysis of finance and accounting, Vol. 6
1
13
E. Agliardi; R. Andergassen
File in questo prodotto:
Eventuali allegati, non sono esposti

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11585/54391
 Attenzione

Attenzione! I dati visualizzati non sono stati sottoposti a validazione da parte dell'ateneo

Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 0
  • ???jsp.display-item.citation.isi??? ND
social impact