Sovereign Risk


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.


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BREAKING DOWN '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.

  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 ...
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