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

Loading the player...
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. Default

    1. The failure to promptly pay interest or principal when due. ...
  6. Country Risk

    A collection of risks associated with investing in a foreign ...
Related Articles
  1. Options & Futures

    A Primer On The Forex Market

    Moving from equities to currencies requires you to adjust how you interpret quotes, margin, spreads and rollovers.
  2. Bonds & Fixed Income

    A Look At National Debt And Government Bonds

    Learn the functions of the U.S. Treasury, and find out how and why it issues debt.
  3. Options & Futures

    Getting Started In Forex

    Before entering this market, you should define what you need from your broker and from your strategy.
  4. Options & Futures

    Using Options Tools To Trade Foreign-Exchange Spot

    Find out how delta, gamma, risk reversals and volatility can all help predict movements in the cash market.
  5. Economics

    Who Benefits From South Korea's Lowered Interest Rates?

    South Korea is the latest country to cut interest rates in an attempt to stimulate economic growth.
  6. Forex

    The Worst Performing Currencies Of 2015

    The U.S. dollar has strengthened over the past year while weakness in Europe and the former Soviet Union has led to declines in those currencies.
  7. Forex

    Is The Swiss Franc A Safe Haven?

    We examine when and why there are runs on Swiss francs.
  8. Forex

    Understanding Currency Carry Trade

    A currency carry trade is a long-term investment strategy used primarily by large institutional investors. The purpose is to make a profit over time from differences in interest rates between ...
  9. Economics

    Venezuela Teeters On Edge As Oil Revenues Shrink

    Low oil prices have drastically revised the economic status quo -- dealing a destabilizing blow to oil-exporters like Venezuela due to falling oil revenue.
  10. Economics

    What Must The UK Do To Keep North Sea Oil Afloat?

    The UK government may need to take drastic action to ensure the viability of UK North Sea offshore oil production amid high costs and shrinking margins.

You May Also Like

Hot Definitions
  1. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  2. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  3. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  4. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  5. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  6. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
Trading Center