Following the global financial crisis that began in 2007, sovereign risk has arguably emerged as the leading area of concern for lenders, investors and policy-makers. A crisis of public finances has beset a wide range of developed nations, including Greece, Spain, Ireland, Iceland, Latvia and Hungary and even countries such as the US, UK, France, Italy and Japan have experienced rapidly deteriorating indicators at central and local government levels. Moreover, these problems could take many years to resolve and the steps taken to redress public finances will impact the allocation of capital and the pricing of risk.

The primary purpose of this intensive 3-day course is to provide an introduction to how sovereign risk can be assessed, predicted and sometimes mitigated. The programme uses a wide range of case studies of sovereign crises, from the 1990s (Asia, Argentina, Russia etc), through to the more recent crises (in parts of Western, Central and Eastern Europe, Dubai etc)  to illustrate how key macro-economic, indebtedness and other indicators can be used to assess and predict changes in sovereign credit profiles . The course examines the potential solutions to sovereign crises and also analyses case studies of sovereigns that are currently stable or on an improving trend (Turkey, Brazil etc). Concurrently, the role, uses and limitations of sovereign ratings are reviewed.  The programme examines how changes in sovereign credit profiles may impact asset allocation and risk pricing in the bond, CDS and equity markets. Finally, the programme presents some methods of mitigating sovereign risk.

Attend this topical 3-day course and learn:

• How to use key macro-economic and debt variables to assess whether a sovereign’s credit risk is stable, improving or deteriorating
• The uses and limitations of sovereign ratings
• How changes in sovereign risk can impact the bond, CDS and equity markets
• How changes in sovereign risk can impact asset allocation and risk pricing
• How various instruments can be used to mitigate sovereign risk
• From multiple case studies of sovereign crisis from the 1990s to the present day, as well as from case studies of improving sovereign credits

Who should attend?

This course has been specifically designed for the benefit of:

• Bank credit officers
• Investment bankers
• Management consultants
• Bond credit analysts
• Fixed income/credit traders
• Fixed income/credit sales people
• Fund managers
• Treasurers
• Compliance officers
• Financial decision makers in corporations
• Equity analysts
• Equity sales people
• Strategists
  

 

Day 1

Registration commences at 8:30 on day one
Programme runs from 9:00 - 5:00 daily

The Basics of Sovereign Risk Analysis Background

• Defining country and sovereign risks
• Recent developments in sovereign risk 
• Implications of changing sovereign risk profiles
• Data sources

Background to Macro-Economics

• Analysis of and outlook for GDP and GNP
• The external sector
• Definitions of public and private sector debt 
• Liquidity, solvency, currency mis-match and debt maturity profile 
• Contingent liabilities 
• Core structural problems
• Savings vs investment, unemployment, inflation etc
• Socio-economic factors
• Key credit ratios for sovereigns

Fiscal Policy and the Influence of Politics

• Monetary policy, QE and the role of the central bank
• The importance of the banking sector
• Local government
• The role of the financial markets

Case studies based on assessments of macro-economic and other data for a range of countries

Currency Factors

• Currency mis-matches
• Currency pegs and boards
• Monetary union – advantages and disadvantages

Day 2

The Role of the Rating Agencies

• The influence of the agencies
• Rating methodology and criteria
• Foreign currency vs domestic currency ratings
• Rating disparities

Case studies based on comparison of ratings & ratings trends with underlying macro-economic data for a range of countries
Sovereign Risk Analysis, Basel II and Basel III

• Regulatory issues regarding sovereign risk

Sovereign Risk Analysis and the CDS Markets

• How changes in sovereign risk affect CDS spreads

Sovereign Risk Analysis and the Equity Markets 

• How changes in sovereign risk affect equity prices and equity risk premia

Deteriorating Sovereign Credits

What Causes Sovereign Credit Deterioration?

• Macro-economic slowdown
• Financial and other shocks
• Rising government debt
• Declining government revenues
• Deteriorating balance of payments
• Liquidity problems

Case studies of sovereign difficulties between the late 1990s and 2010: Argentina, Asia, Dubai, Greece, Hungary, Iceland, Jamaica, Japan, Latvia, Portugal, Russia, Spain, Ukraine etc

The Role of Intergovernmental Institutions in Sovereign Crises

• The IMF
• The BIS
• The World Bank, ADB, etc

Day 3

Recovering from a Sovereign Crisis

Potential Outcomes

• Default, debt restructuring or moratorium
• External loans
• Fiscal policy solutions - austerity vs reducing government debt
• Monetary policy solutions - low interest rates, QE, ring-fencing liabilities
• Currency devaluation - inflationary, income and wealth effects
• The future of the Euro

Case studies based on analysing how various countries recovered from sovereign crises, including Russia, Asia, Argentina etc

Methods of Mitigating Sovereign Risk

• The CDS markets
• National/multi-national guarantees
• Securitisation of future cashflows

Stable and Improving Sovereign Credits

• Why are some sovereigns improving?
• Implications for asset allocation

Case studies involving Brazil, Chile, China, Hong Kong, Peru, Turkey, Indonesia, various Gulf States etc

Course Summary

 

• Sarah Martin

  Former Executive Director of CSFB and Lehman Brothers

  Sarah Martin has spent seventeen years working as an investment banker in Europe and the US. She has principally worked in the credit markets and has experience of the US and European high grade and high yield markets, the European new issue markets, the Asian convertible bond markets and of corporate restructurings of distressed credits. She specialised in the telecoms sector and was closely involved in the structuring, raising and/or trading of bank and public debt for telecoms companies in many countries, including Europe, South Africa, Asia and Latin America. She also has extensive experience of corporate finance transactions, including mergers, disposals, privatisations, IPOs and capital raisings. Until 2003, she was an Executive Director at Lehman Brothers in Fixed Income Research in London, having also worked for CS First Boston and Kleinwort Benson. She now works on an independent basis advising the legal and private equity professions on credit analysis and company valuation. She has a degree in economics from the London School of Economics and stock exchange qualifications from London and New York.

  Courses run by this instructor

  • Corporate Credit Analysis and Financial Modelling
  • London School of Credit Analysis

Sovereign Risk Analysis

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.

Retail Credit Risk and Credit Scoring

1-4 Oct 2012 (London, UK)

Credit Risk Modelling

30 May 2012 - 1 Jun 2012 (London, UK)

Valuation framework, derivatives tools and techniques and implementation mechanics

Leveraged Loan Syndication & Distressed Debt

21-23 Nov 2012 (London, UK)

This practical 3-day training course will teach you everything you need to know about leveraged loan syndication and distressed debt and restructuring.

Syndicated Loans

26-28 Sep 2012 (London, UK)

This 3-day training course looks at structuring and pricing syndicated loans.

Corporate Credit Analysis and Financial Modelling

12-16 Nov 2012 (London, UK)

The aim of this 5 day course is to teach delegates how to analyse corporate credit risk and how to assess an appropriate return.

London School of Credit Analysis

9-13 Jul 2012 (London, UK)

During the 5 days, two of the top credit specialists will take you through the regulations, rating agencies, cashflow, debt issues, corporate loan workouts and financial restructuring.