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 ?
Euromonitor said the sovereign risk remains a "serious concern" in many parts of the world.
A: In essence, we have done the following tests: first, banks need to calculate their estimated Tier 1 capital ratio under a benchmark scenario for 2010 and 2011, then the same calculations are performed under an adverse scenario and finally, within this adverse scenario, a shock on sovereign risk is considered.
The euro, and some European asset prices, remain at the mercy of fears about sovereign risk.
"Although the Greek government appears to be on, or even ahead of, schedule in terms of the implementation of the actions laid out in its Stability and Growth Program, the difficult macroeconomic and financial environment has made continued adherence to the program considerably more challenging," says Sarah Carlson, vice president and senior analyst in the sovereign risk group and lead analyst for Greece.
Our model, which attempts to explain historical movements in the RTS Index and identify deviations in trends, is computed using regression analysis based on the following five variables: 1) Russia's sovereign risk premium, 2) oil prices, 3) the S&P500, 4) the Bovespa Index (here used as a proxy for emerging markets), and 5) the EUR/USD exchange rate.
AoThe main driver of the rating change is the comparative strength of OmanAAEs public finances within its rating peer group,Ao said Tristan Cooper, senior credit officer in MoodyAAEs Sovereign Risk Group.
NORDIC BUSINESS REPORT-7 June 2006-EKF and Sovereign Risk conclude joint insurance transaction(C)1994-2006 M2 COMMUNICATIONS LTD http://www.m2.com
Electric power and gas utilities are more likely than other Japanese firms to be affected by sovereign risk, it said.
Leading a team of prominent technocrats, the Finance Minister, former World Bank executive Ngozi Okonjo-Iweala, has cultivated foreign investors and pushed the debt renegotiation as a means to slash the sovereign risk premium.
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.
Companies moving to Chile also have better financing prospects because of Chile's low sovereign risk rating, compared to other Latin American countries.