Debt restructuring is one of the policy tools available for resolving sovereign debt crises and, while unorthodox, it is not uncommon. We propose a scenario analysis for debt sustainability and integrate it with scenario optimization for risk management in restructuring sovereign debt. The...

We develop a model of debt sustainability analysis with optimal financing decisions in the presence of macroeconomic, financial and fiscal uncertainty. We define a coherent measure of refinancing risk, and trade off the risks of debt stock and flow dynamics, subject to debt sustainability...

We 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...

We develop models for portfolio diversification in the sovereign credit default swap (CDS) markets and show that, despite literature findings that sovereign CDS spreads are affected by global factors, there is sufficient idiosyncratic risk to be diversified away. However, we identify regime...

We model the super-replication of payoffs linked to a country's GDP as a stochastic linear program on a discrete time and state-space scenario tree to price GDP-linked bonds. As a by-product of the model we obtain a hedging portfolio. Using linear programming duality we compute also the risk...

We develop a pricing model for sovereign contingent convertible bonds (S-CoCo) with payment standstills triggered by a sovereign's credit default swap CDS spread. One innovation is the modeling of CDS spread regime switching which is prevalent during crises. Regime switching is modeled as a...