sovereign risk

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 ?
After an introduction by Jamil Koudim, Portfolio Manager and Head of Fixed Income Unit, Father Paul Douaihy, Director of the ECMRC, gave a global presentation about the sovereign risk and the different variables that need to be monitored in order to gauge this risk.
27, 2012 /PRNewswire/ -- Sovereign Risk Solutions, LLC (Sovereign), announced today that Arthur (Al) Fuller , has joined the company as Client Executive of the property and casualty division.
Summary: Credit default swap, or CDS, spreads in Abu Dhabi have dramatically narrowed since May 2012, from 142 to 99, signifying an increasing investor confidence on the back on diminishing sovereign risk.
In terms of sovereign risk, I love the debate about sovereign risk," Conroy answered.
In the case of climate change risk, the first warning was in 1827 by Jean Baptiste Fourier and yet despite nearly 200 years of warning, companies are still complaining about sovereign risk of governments as they put in place policies to mitigate against climate change.
Overall, the Chancellor is putting the economy through some unnecessary risks because of his fear of sovereign risk, which does not appear justified.
Figures obtained by Eur-omonitor International showed that sovereign risk levels have sharply increased worldwide, raising concerns that many governments might fail to meet their financial commitments.
Global Banking News-12 May 2010-Deutsche Bank says sovereign risk in most parts of Europe is small(C)2010 ENPublishing - http://www.
In most advanced economies, the recovery will be fragile because of numerous headwinds - especially those related to the expected challenges in sovereign risk in 2010," said Moody's Global Sovereign Risk Group managing director Pierre Cailleteau.
Yepes explained that loan pricing and terms at Wachovia are dependent on sovereign risk ratings, the size of the transaction and market conditions.
We're constantly writing new spins on existing products on every deal," said Price Lowenstein, president of Sovereign Risk Insurance, a Bermuda-based company that specializes in writing political risk insurance.
OECD governments are facing unprecedented challenges in the markets for government securities as a result of continued strong borrowing amid a highly uncertain environment with growing concerns about the pace of recovery, surging borrowing costs, sovereign risk and contagion pressures.