COURSE OVERVIEW
The rising government, state and municipal deficits, as well as global debt levels and the downgrading of European Government debt, have created alarm in the global financial markets.
This practical course will provide a comprehensive introduction to sovereign and quasi-sovereign risk
and an understanding of the tools and methods used in assessing and managing these risks. It defines
the concepts “country risk” and “sovereign risk”, and explains the sources of these types of risk and
the role they have played in the current and previous financial downturns.
Modules will cover the economic and financial foundations of country risk assessment, and explain the debt dynamics and “events” such as debt restructuring, debt moratorium, and currency devaluation. You
will discuss how country and sovereign risks are reflected in country and sovereign/quasi-sovereign credit risk ratings and their impact on sovereign debt markets.
Quantitative risk models for country and sovereign risk will be presented and explained as to how these models are employed in practice for calculating “Country VaR” and other risk measures. The course will conclude with an explanation and discussion of the tools used for mitigating sovereign risk. You will leave this course with an in-depth knowledge on how to analyze, rate and manage Sovereign and Quasi-Sovereign
Risk which you will take back to your organisation and implement immediately.
- Understanding the links between the financial crisis, country risk and sovereign default risk
- Exploring the economic and financial foundations of country risk assessment
- Assessing the risks in quasi-sovereign counterparties and borrowers
- Reviewing recent case studies from Asia Pacific and the Middle East
- Learning how to hedge or take positions in sovereign and quasi-sovereign debt
- Profiting from integrated international portfolio investments including sovereign and quasi-sovereign debt
- Understanding the impact/relevance of the recent Euro zone crisis on Asian economies
WHO SHOULD ATTEND?
- Country and bank risk managers
- International investment bankers
- Corporate treasurers
- Risk analysts
- Economists in banks
- Investors
- Export credit managers
- Banking strategists
- Emerging market traders
- Financial institution bankers and relationship managers
Credit rating personnel
- Banking system regulators and supervisory staff
Supporting publications
Day One
Financial crisis, country risk and (quasi-) sovereign default risk
- Country and sovereign risk: definitions, terminology, sources of risk
- The European debt crisis and the future of the Euro
- Sovereign debt crisis – the historical perspective
- Solving debt crisis – debt reduction strategies and instruments
Case studies:
– The Asian Crisis of 1997-98
– Argentina, Iceland, Greece
– The Dubai Debt Crisis
Economic and financial foundations of country risk assessment
- Country debt dynamics
- Near, medium and long term fiscal outlooks
- Default/moratorium/restructuring
- Devaluation
– Relative price effects
– Income effects
– Stock adjustments
– Country risk ratios
Sovereign and Quasi-Sovereign Risk: Analysis, Country risk assessment methodologies
- Welfare and social indicators
- Macroeconomic structures of growth
- External indebtedness, liquidity and solvency
- The savings-investment gap and domestic financial intermediation
- Growth, crisis and governance
Case studies
Day Two
Country and (quasi-) sovereign ratings and their interpretations
- Global country risk ratings
– Specialised ranking firms
– Export credit agencies
– Global country risk ranking methods
- Country (sovereign) credit risk ratings
– The methodologies of major credit rating agencies (Moody’s, S&P and Fitch)
– Sovereign debt ratings and their interpretations
– The impact of ratings on sovereign bond markets (spreads etc.)
- Quasi-sovereign debt ratings
– Rating methodology for government related issuers
Case studies:
Global, Asian and Middle East
Quantitative risk models for country and sovereign risk
- Econometric and mathematical models
- Value-at-Risk (VaR)
- Principal components analysis
- Models for assessment of credit risk
– Probabilities of default using historical data
– Probabilities of default using credit spreads
– CountryMetrics
– Loss given default and credit VaR
– Incorporating correlation and contagion
Case studies
Day Three
International portfolio investment analysis
– The Macro CAPM
– Measuring political risk as an insurance premium
- International portfolio and country risk management
– The impact of country risk on international portfolio investment
– The International Capital Asset Pricing Model (ICAPM)
– Limitations of the ICAPM
Case study and exercise
Hedging country and sovereign risk
- Overview of country and sovereign risk mitigation instruments
- National export credit agencies
- Multilateral risk guarantee institutions
- Public and private risk guarantee institutions
- The market-based approach
- Using project finance and future flow securitisations to mitigate country risk
- Hedging sovereign with credit derivatives
- Regulatory aspects (Basel III, Solvency II etc.)
Case study and exercise
Summary and outlook
Evaluation and end of course
Interested in holding this course in-house? Please fill out your details and a member of our team will be in touch with more information.
This course has now expired please email us to find out when the course will next be running.