Sovereign risk

Definition:

The risk that a central bank will impose foreign exchange regulations that will reduce or negate the value of foreign exchange contracts. Also refers to the risk of government default on a loan made to a country or guaranteed by it. The government's part of political risk.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Reverse conversion

A technique in which brokerage firms earn interest on the stocks they hold for their customers by selling the short and investing the proceeds in money market accounts. The short positions are hedged... Read More

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