We analyze how the yield of Government securities may be managed in order to save costs in face of the risk of a liquidity shock. This issue is especially relevant for highly indebted countries that are under the threat of positive changes in the yields of public debt bonds. In this regard, we study the liquidity features of the Italian Government bond market with the aims of: 1) formalizing and estimating the intertemporal effects on yields of a debt-liquidity shock, with a view to understanding how to reduce costs in case of new bonds issuances; 2) evaluating the effectiveness of the average liquidity cost index, which is traditionally being used, by finding its conditional probability.
We analyze how the yield of Government securities may be managed in order to save costs in face of the risk of a liquidity shock. This issue is especially relevant for highly indebted countries that are under the threat of positive changes in the yields of public debt bonds. In this regard, we study the liquidity features of the Italian Government bond market with the aims of: 1) formalizing and estimating the intertemporal effects on yields of a debt-liquidity shock, with a view to understanding how to reduce costs in case of new bonds issuances; 2) evaluating the effectiveness of the average liquidity cost index, which is traditionally being used, by finding its conditional probability.
Debt-liquidity shock risk: intertemporal effects and probability measures / Maggi, Bernardo. - In: THE JOURNAL OF RISK. - ISSN 1465-1211. - STAMPA. - 19:3(2017), pp. 1-24. [10.21314/JOR.2016.350]
Debt-liquidity shock risk: intertemporal effects and probability measures
MAGGI, Bernardo
2017
Abstract
We analyze how the yield of Government securities may be managed in order to save costs in face of the risk of a liquidity shock. This issue is especially relevant for highly indebted countries that are under the threat of positive changes in the yields of public debt bonds. In this regard, we study the liquidity features of the Italian Government bond market with the aims of: 1) formalizing and estimating the intertemporal effects on yields of a debt-liquidity shock, with a view to understanding how to reduce costs in case of new bonds issuances; 2) evaluating the effectiveness of the average liquidity cost index, which is traditionally being used, by finding its conditional probability.| File | Dimensione | Formato | |
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