08-08-2003, 09:32 AM
Hi Raza!
I think u started off correctly, but the ramblings got better of u.
Just to remind us all in what context we r talking of country risk.
IAS 36 under the heading <b>DISCOUNT RATE</b> states that if a market determined, asset-specific rate is not availabe for determining the value of asset or portfolio of assets than we can construct a discount rate taking into account <b>country risk, currency risk, price risk, and cash flow risk</b>
So if the Indonesian party cann't get foreign exchange [that will only happen if Indonesia is nuked by some super power] that is a currency risk because than your exporter will have to accept Indonesian rupee and do whatever it likes with it [although this example is a theoritical non-sense].
It is true that Country Risk is different from Sovereign Risk, but it is not true that Country Risk embodies Sovereign Risk. Sovereign risk is the risk that govt or its agencies will default on their loans payment, whereas country risk is risk generated by the political and economic policies of the govt. So if a govt. is debt free it can still generate country risk by unwise policies.
Hope i made myself clear. Can u guys quote any references. I am looking at a research paper prepared by S&P"Behind The RatingsSovereign Credit RatingsA Primer"
Take care!
Edited by - Pervez on Aug 08 2003 043634 AM
Edited by - Pervez on Aug 08 2003 044608 AM
Edited by - Pervez on Aug 08 2003 044806 AM
I think u started off correctly, but the ramblings got better of u.
Just to remind us all in what context we r talking of country risk.
IAS 36 under the heading <b>DISCOUNT RATE</b> states that if a market determined, asset-specific rate is not availabe for determining the value of asset or portfolio of assets than we can construct a discount rate taking into account <b>country risk, currency risk, price risk, and cash flow risk</b>
So if the Indonesian party cann't get foreign exchange [that will only happen if Indonesia is nuked by some super power] that is a currency risk because than your exporter will have to accept Indonesian rupee and do whatever it likes with it [although this example is a theoritical non-sense].
It is true that Country Risk is different from Sovereign Risk, but it is not true that Country Risk embodies Sovereign Risk. Sovereign risk is the risk that govt or its agencies will default on their loans payment, whereas country risk is risk generated by the political and economic policies of the govt. So if a govt. is debt free it can still generate country risk by unwise policies.
Hope i made myself clear. Can u guys quote any references. I am looking at a research paper prepared by S&P"Behind The RatingsSovereign Credit RatingsA Primer"
Take care!
Edited by - Pervez on Aug 08 2003 043634 AM
Edited by - Pervez on Aug 08 2003 044608 AM
Edited by - Pervez on Aug 08 2003 044806 AM
