Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/204896
Authors: 
Niepelt, Dirk
Year of Publication: 
2017
Series/Report no.: 
Discussion Papers No. 17-03
Abstract: 
Rejecting a common assumption in the sovereign debt literature, we document that creditor losses ("haircuts") during sovereign restructuring episodes are asymmetric across debt instruments. We code a comprehensive dataset on instrument-specific haircuts for 28 debt restructurings with private creditors in 1999-2015 and find that haircuts on shorter-term debt are larger than those on debt of longer maturity. In a standard asset pricing model, we show that increasing short-run default risk in the run-up to a restructuring episode can explain the stylized fact. The data confirms the predicted relation between perceived default risk, bond prices, and haircuts by maturity.
JEL: 
F34
F41
H63
Document Type: 
Working Paper

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