Search Investopedia

Sovereign Risk

Filed Under »
Dictionary Says

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 Says

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.

Related Definitions

  •

    Default

    1. The failure to promptly pay interest or principal when due. Default occurs when a debtor is unable to meet the legal obligation of debt repayment. Borrowers may default when they are ...
    Read More »

  • Political Risk

    The risk that an investment's returns could suffer as a result of political changes or instability in a country. Instability affecting investment returns could stem from a change in ...
    Read More »

  • Country Risk

    A collection of risks associated with investing in a foreign country. These risks include political risk, exchange rate risk, economic risk, sovereign risk and transfer risk, which is ...
    Read More »

    • Liquidity Risk

      The risk stemming from the lack of marketability of an investment that cannot be bought or sold quickly enough to prevent or minimize a loss.
      Read More »

    • Systematic Risk

      The risk inherent to the entire market or entire market segment. Also known as "un-diversifiable risk" or "market risk."
      Read More »

    • Unsystematic Risk

      Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through appropriate diversification. Also known as "specific risk", ...
      Read More »

    • Price Risk

      The risk of a decline in the value of a security or a portfolio. Price risk is the biggest risk faced by all investors. Although price risk specific to a stock can be minimized through ...
      Read More »

    • 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 two rates, in the shape of the yield curve or in any other ...
      Read More »

    • Swap Network

      A worldwide network of central banks that establish a reciprocal credit line relationship to temporarily swap currencies. The purpose of the swap is to give each bank the ability to ...
      Read More »

    • Sovereign Default

      A failure on the repayment of a county's government debts. Countries are often hesitant to default on their debts, since it will be difficult and expensive to borrow funds after a ...
      Read More »

Articles Of Interest

Sponsored links
Hot Definitions
Partner Links
Suggested Definitions