July 17, 2019
Game theory is a useful framework for modeling aspects of sovereign debt recoveries, given that it models the interactions among debtors and creditors in the lending/borrowing “game.” While there is a long-established set of precedents for Paris Club (U.S. & European) and multilateral (IMF, etc) creditors’ actions, we still have little available information about how China will act in debt negotiations. The increasing presence of China as a single large bilateral creditor in our markets, therefore, is worth modeling to see what kind of postures they might take. As commercial lenders alongside sovereign and multi-lateral lenders, we and our investors have a stake in the possible answers provided.
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