02200cas a2200325 a 4500 AALejournalIMF022224 230101c9999 xx r poo 0 0eng d 5.00 USD 9781616357009 1018-5941 BD-DhAAL BD-DhAAL Igan, Deniz. The Premia on State-Contingent Sovereign Debt Instruments / Deniz Igan, Taehoon Kim, Antoine Levy. Washington, D.C. : International Monetary Fund, 2021. 1 online resource (48 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 State-contingent debt instruments such as GDP-linked warrants have garnered attention as a potential tool to help debt-stressed economies smooth repayments over business cycles, yet very few studies of the empirical properties of these instruments exist. This paper develops a general f ramework to estimate the time-varying risk premium of a state-contingent sovereign debt instrument. Our estimation framework applied to GDP-linked warrants issued by Argentina, Greece, and Ukraine reveals three stylized facts: (i) the risk premium in state-contingent instruments is high and persistent; (ii) the risk premium exhibits a pro-cyclical pattern; and (iii) the liquidity premium is higher and more volatile than that for plain-vanilla government bonds issued by the same sovereign. We then present a model in which investors fear ambiguity and that can account for the cyclical properties of the risk premium. Mode of access: Internet Contingent Pricing imf Debt Management imf Debt imf Futures Pricing imf Sovereign Debt imf Kim, Taehoon. Levy, Antoine. IMF Working Papers; Working Paper ; No. 2021/282 Full text available on IMF http://elibrary.imf.org/view/journals/001/2021/282/001.2021.issue-282-en.xml IMF e-Library