Sovereign bonds, Financial Management

There are two major factors to be considered while analyzing sovereign bonds. They are: economic risk and political risk. Economic risk is all about the ability and the willingness of the government to satisfy its obligation. Analysts have to perform both qualitative and quantitative tests to analyze economic risk.

The two ratings assigned to a national government are local currency debt rating and foreign currency debt rating. Historically, the default rate on foreign currency debt is higher compared to the local currency debt rating. For a local currency debt rating, the government depends on the taxes and the financial system of its country but with the latter, the government has to purchase foreign currency to meet its obligation. Any depreciation in local currency would affect the government's ability to meet its obligation.

Posted Date: 9/11/2012 1:13:39 AM | Location : United States







Related Discussions:- Sovereign bonds, Assignment Help, Ask Question on Sovereign bonds, Get Answer, Expert's Help, Sovereign bonds Discussions

Write discussion on Sovereign bonds
Your posts are moderated
Related Questions
Financial Communications Also known as investor or shareholder relations, this corporate communication sub function moves against from the traditional handling of the finan

There are several methods available to forecast yield volatility. But before that, let us look into the calculation of forecasted standard deviation. Assume th

Q. Show the Phase of Traditional Approach? Phase of Traditional Approach: According to the traditional approach the way in which the overall cost of capital and the value of th

The purpose of this financial analysis is to determine the economic viability during the last five years of the Lance Company and to advise our client on whether the acquisition of

Q. What do you mean by Collateralized Mortgage Obligation? Collateralized Mortgage Obligation (CMO) - SECURITY whose cash flows equal the difference between cash flows of colla

What is behind the wave of mergers in the banking industry? A: Various economic factors have caused banking institutions to merge over the past various years. These factors inclu

Assume that we have the following data: C=100+0.50Y Ip=100-20r Mt=0.10Y Ms=100-10r M=80 a. Build the IS-LM function. b. If we assume an increase in Investments by 100 units, p

Historical Inflation and Stock Value Experience The experimental evidence denies the status of stocks as a good hedge against inflation. A study conducted by Ibbotson and Brins

What was the first argument against traditional approach The first argument against traditional approach was based on its emphasis on issues relating to procurement of funds by

Options Traded on Legal and General August 14  2009 Share   Price         Exercise      Price    Calls       Puts                                 Sep        Dec        Mar