Optimization in sovereign debt financing Risk Management Optimization for Sovereign Debt Financing Stavros A. Zenios University of Cyprus Bruegel Wharton Financial Institutions Center Andrea Consiglio, University of Palermo M. Athanasopoulou, A. Erce, A. Gavilan, E. Moshammer European Stability Mechanism ESM, Luxembourg, Dec. 2018. 1 / 26
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Risk Management Optimization for Sovereign Debt Financing · Athanasopoulou et al., Risk management for sovereign nancing within a debt sustainability framework, European Stability
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Optimization in sovereign debt financing
Risk Management Optimization
for Sovereign Debt Financing
Stavros A. ZeniosUniversity of Cyprus
BruegelWharton Financial Institutions Center
Andrea Consiglio, University of Palermo
M. Athanasopoulou, A. Erce, A. Gavilan, E. MoshammerEuropean Stability Mechanism
ESM, Luxembourg, Dec. 2018.1 / 26
Optimization in sovereign debt financing
Some history
Consiglio and Zenios (January 2015)
The devil is in the tails, //Voxeu.org.
Consiglio and Zenios (2016)
Risk management optimization for sovereign debtrestructuring, Journal of Globalization and Development,6(2):181–213, J. Stiglitz et al. (editors).
Replicate stylized model from economic literature:gambling for redemption (Conesa and Kehoe), cost ofdelays (Blanchard)
Extension of feedback loop
X → D → r → Y → PB→ X
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Optimization in sovereign debt financing
Publications
Athanasopoulou et al., Risk management for sovereignfinancing within a debt sustainability framework, EuropeanStability Mechanism, Working Paper Series 31, Luxembourg,July 2018.
Consiglio, A. and S.A. Zenios, Risk management optimizationfor sovereign debt restructuring, Journal of Globalization andDevelopment, 6(2):181–213, J. Stiglitz et al. (editors), 2016.
Consiglio, A., Carollo, A. and S.A. Zenios, A parsimoniousmodel for multi-factor arbitrage-free scenario trees,Quantitative Finance, 16:201-212, 2016.