sovereign risk

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Sovereign risk

The risk that a central bank will impose foreign exchange regulations that will reduce or negate the value of foreign exchange contracts. Also refers to the risk of government default on a loan made to a country or guaranteed by it. The government's part of political risk.

Sovereign Risk

In foreign exchange, the risk that a foreign central bank will significantly alter its monetary policy or other foreign exchange regulations so that it significantly affects one's currency trades. More broadly, it can apply to any political risk that a nation will refuse to comply with an agreement to which it is a party. For example, if one conducts a currency trade involving a pegged currency and the country in question decides to let its currency float, it can significantly impact the profitability of the currency trade. See also: Liquidity risk, Credit risk.

sovereign risk

The risk of owning the security of an issuer in a country other than the one in which the investor lives. For example, an investor residing in the United States incurs sovereign risk in purchasing a bond issued by the government of Brazil. This risk stems from the fact that a foreign country may nationalize its private businesses, stop paying interest, or repudiate its debt.
References in periodicals archive ?
But in my view Britain is a long way from such a threat, and the Chancellor has exaggerated the sovereign risks that are threatening the country.
These IFC and future flow transactions reduce sovereign risks, such as the potential for the sovereign government to prohibit the transfer of foreign capital to repay debt and the risk that debt payments cannot be converted into the currency in which the debt must be repaid.
The ratings incorporate sovereign risks including transfer and convertibility risks associated with investments in Jamaica.
Wollmann will be responsible for underwriting transactions involving asset-backed securities and other structured financings, as well as corporate, financial institutions, and sovereign risks and will report to Vernon M.
The ratings on all series are higher than Fitch's 'BB' rating on the foreign and local currency obligations of Brazil, as the transaction mitigates certain sovereign risks associated with that country.
In addition, future flow securitizations mitigate many of the sovereign risks associated with an emerging-market borrower such as transfer and convertibility.
The ratings of AES El Salvador also incorporate the economic, political and other sovereign risks inherent in investments in El Salvador.
The ratings on all series are higher than Fitch's 'BB-' rating on the foreign and local currency obligations of Brazil, as the transaction mitigates certain sovereign risks associated with that country.
The ratings of AES Clesa also incorporate the economic, political, and other sovereign risks inherent in investments in El Salvador.
Tenaris' rating incorporates sovereign risks of some of the countries in which the company operates.
This flow-of-funds structure significantly mitigates currency risk and other sovereign risks.
Strengths of the DPR program include the support of the MBIA and AMBAC financial guaranties, as well as the stand-alone structure that mitigates certain sovereign risks associated with Brazil.