Emerging Market Dept: Measuring Credit Quality and Examining Relative Pricing
Cumby, R. E.
Journal of International Money and Finance
Cumby, R. E., & Pastine, T. (2001). Emerging market debt: measuring credit quality and examining relative pricing. Journal of International Money and Finance, 20(5), 591-609.
Please cite this item using this persistent URLhttp://hdl.handle.net/11693/11197
We investigate the pricing of ‘Brady’ bonds that are issued by the governments of five developing countries as part of debt and debt service reduction agreements. We first present a measure of credit quality that takes account of the individual features of each bond and is comparable across bonds, across issuers, and over time. We then examine the evolution of the credit quality of each debt instrument from 1990 until the beginning of 2000. Next, we present evidence of a profitable trading strategy that exploits the information contained in this measure of credit quality. 2001 Elsevier Science Ltd. All rights reserved.
- Department of Economics