Strategies for Managing Sovereign Debt

A Robust Decision Making Approach

Shmuel Abramzon

ResearchPublished Dec 24, 2014

Sovereign debt portfolios are affected by financial and economic factors that are themselves deeply uncertain. Building on methodological developments for policy making under deep uncertainty, this dissertation examines and demonstrates how the Robust Decision Making (RDM) methodology could be applied to the problem of selecting the government's debt portfolio. Using a large set of non-probabilistic simulations coupled with data mining tools, the analysis identifies and characterizes bond issuance strategies that appear to perform well across a large set of possible assumptions and scenarios. This approach introduces a new framework for assessing funding strategies based on varying assumptions regarding the government's liquidity buffer. This proof-of-principle analysis illustrates possible improvements to debt management practices, both in government and in the private sector.

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Abramzon, Shmuel, Strategies for Managing Sovereign Debt: A Robust Decision Making Approach. Santa Monica, CA: RAND Corporation, 2014. https://www.rand.org/pubs/rgs_dissertations/RGSD340.html.
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This document was submitted as a dissertation in September 2014 in partial fulfillment of the requirements of the doctoral degree in public policy analysis at the Pardee RAND Graduate School. The faculty committee that supervised and approved the dissertation consisted of Steven Popper (Chair), Robert Lempert, and Zvi Wiener.

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