Country Risk Assessment Research Articles

Assessing country risk for foreign investment decisions

Foreign investment decisions are typically taken using mainly economic evaluation criteria. Nowadays many companies are becoming aware that there are additional risks associated with foreign investment that arise as a direct consequence of choosing to operate in a different environment. Country risk assessment as an emerging function in international business reflects a growing recognition of the need to include an evaluation of these additional risks in any comprehensive foreign investment proposal. So far the emphasis has been on assessing the risk associated with factors such as political and economic stability. Little attention has been given to the risks that could arise from the effects of basic socio-cultural differences between the domestic and the proposed foreign environments. How can socio-cultural differences be structured into country risk assessment procedures? This paper develops a framework to answer this need and demonstrates its application to a typical foreign investment scenario.

Applying portfolio theory to global bank lending

Portfolio theory provides some insights into how a bank should manage its global exposures. Practical application of some of the principles of portfolio analysis is possible if comparable credit ratings are available and if the impact on each loan's rating of likely future events can be assessed. If further restrictive assumptions are made about which quality dimensions of the portfolio are more important (and how much more important), and if judgements can be quantified about what risk-return tradeoffs are acceptable, then it is possible to derive measures to guide exposure and pricing decisions. This article is related to the other papers in this special issue in that country and corporate risk assessment methodologies can provide important inputs into the portfolio analysis. This paper, however, attempts to go beyond the evaluation of risk at the level of individual companies, countries, or other loan customers, and to focus instead on the problem of managing the riskiness of the overall bank loan portfolio.

Assessing country risk

Assessing country risk Get access Peter Gutmann Peter Gutmann National Intelligence Department, National Westminister Bank, UK Search for other works by this author on: Oxford Academic Google Scholar Science and Public Policy, Volume 7, Issue 5, October 1980, Pages 327–336, https://doi.org/10.1093/spp/7.5.327 Published: 01 October 1980

The Interest Rate Parity Theorem: A Reinterpretation

The Interest Rate Parity Theorem: A Reinterpretation

Determinants of Risk Premiums on Corporate Bonds

ECONOMISTS have long agreed that the rate of interest on a loan depends on the risks the lender incurs. But how lenders estimate these risks has been left largely to conjecture. This paper presents and tests a hypothesis about the determinants of risk premiums on corporate bonds. By risk premium is meant the difference between the market yield on a bond and the corresponding pure rate of interest. My hypothesis is as follows: (1) The average risk premium on a firm's bonds depends first on the risk that the firm will default on its bonds and second on their marketability. (2) The "risk of default" can be estimated by a function of three variables: the coefficient of variation of the firm's net income over the last