Government Debt Policy - Modern approach through derivatives and alternative
|Author:||Mgr. Ján Čavojec|
|Year:||2012 - winter|
|Leaders:|| prof. Ing. Oldřich Dědek CSc.
|Work type:|| Finance, Financial Markets and Banking
|Awards and prizes:|
|Abstract:||This master thesis discusses alternative debt management instruments – GDP-linked bonds. It provides
concise characterization of sovereign debt management. Additionally, it discusses traditional derivatives,
such as futures, swaps and bonds, from the government’s point of view. The main goal of the thesis is to
verify whether GDP-linked bonds are suitable for the Czech and Slovak debt management. Ergo, the
bonds could smooth the cost of serving the debt. Furthermore, it describes the development of the
sovereign debt and risk premium of the government bonds of the Czech and Slovak republics. It tries to
find out whether the risk premium of Slovak bonds differed after introduction of euro. Additionally, the
thesis analyzes the effect of various country specific variables on the development of the risk premium.
The last but not least goal is to support or reject the hypothesis whether the GDP-linked bonds should be
appealing to European economic and monetary union as the members has to satisfied Stability and
Growth Pact requirements. The conclusion of the thesis is that the hypothesis of positive effect of the
GDP-linked bonds on the cost of serving debt is partly rejected in case of the Czech and Slovak
republics as well as in the case of European economic and monetary union. Furthermore, the risk
premium of the Slovak bonds decreased after the new currency was introduced.