02056cas a2200253 a 4500 AALejournalIMF014695 230101c9999 xx r poo 0 0eng d 5.00 USD 9781498379779 1018-5941 BD-DhAAL BD-DhAAL Desgranges, Gabriel. Optimal Maturity Structure of Sovereign Debt in Situation of Near Default / Gabriel Desgranges, Celine Rochon. Washington, D.C. : International Monetary Fund, 2014. 1 online resource (43 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students We study the relationship between default and the maturity structure of the debt portfolio of a Sovereign, under uncertainty. The Sovereign faces a trade-off between a future costly default and a high current fiscal effort. This results into a debt crisis in case a large initial issuance of long term debt is followed by a sequence of negative macro shocks. Prior uncertainty about future fundamentals is then a source of default through its effect on long term interest rates and the optimal debt issuance. Intuitively, the Sovereign chooses a portfolio implying a risk of default because this risk generates a correlation between the future value of long term debt and future fundamentals. Long term debt serves as a hedging instrument against the risk on fundamentals. When expected fundamentals are high, the Sovereign issues a large amount of long term debt, the expected default probability increases, and so does the long term interest rate. Mode of access: Internet Rochon, Celine. IMF Working Papers; Working Paper ; No. 2014/168 Full text available on IMF http://elibrary.imf.org/view/journals/001/2014/168/001.2014.issue-168-en.xml IMF e-Library