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.
And though they have a much shorter history than traditional bonds, corporate CDS offer a straight-forward comparison with sovereign risk without requiring adjustments for extraneous changes in corporate bond risk that aren't connected to changes in sovereign risk.
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.
Both the FSR and the foreign currency ratings could come under pressure if the operating environment and sovereign risk situation worsen.
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.
NORDIC BUSINESS REPORT-7 June 2006-EKF and Sovereign Risk conclude joint insurance transaction(C)1994-2006 M2 COMMUNICATIONS LTD http://www.
Yepes explained that loan pricing and terms at Wachovia are dependent on sovereign risk ratings, the size of the transaction and market conditions.