Sovereign Risk

AAA

DEFINITION of 'Sovereign Risk'

The risk that a foreign central bank will alter its foreign-exchange regulations thereby significantly reducing or completely nulling the value of foreign-exchange contracts.

INVESTOPEDIA EXPLAINS 'Sovereign Risk'

This is one of the many risks that an investor faces when holding forex contracts. Additionally an investor is exposed to interest-rate risk, price risk and liquidity risk amongst others.

VIDEO

RELATED TERMS
  1. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. ...
  2. Systematic Risk

    The risk inherent to the entire market or entire market segment. ...
  3. Sovereign Default

    A failure on the repayment of a county's government debts. Countries ...
  4. Swap Network

    A worldwide network of central banks that establish a reciprocal ...
  5. Price Risk

    The risk of a decline in the value of a security or a portfolio. ...
  6. Interest Rate Risk

    The risk that an investment's value will change due to a change ...
Related Articles
  1. A Primer On The Forex Market
    Options & Futures

    A Primer On The Forex Market

  2. A Look At National Debt And Government ...
    Bonds & Fixed Income

    A Look At National Debt And Government ...

  3. Getting Started In Forex
    Options & Futures

    Getting Started In Forex

  4. Using Options Tools To Trade Foreign-Exchange ...
    Options & Futures

    Using Options Tools To Trade Foreign-Exchange ...

Hot Definitions
  1. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  2. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  3. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
  4. Parity Price

    When the price of an asset is directly linked to another price. Examples of parity price are: 1. Convertibles - the price ...
  5. Earnings Multiplier

    An adjustment made to a company's P/E ratio that takes into account current interest rates. The earnings multiplier is used ...
  6. Macroeconomics

    The field of economics that studies the behavior of the aggregate economy. Macroeconomics examines economy-wide phenomena ...
Trading Center