Country and Sovereign Risk: Analysis, Rating and Risk Management
Dates:
September 23 - 24, 2010
September 23 - 24, 2010
Location:
Prague, Mövenpick Hotel
Prague, Mövenpick Hotel
Price:
EUR 1,500
EUR 1,500
Lecturer:
Søren Plesner
Søren Plesner
- Financial Crises, Country Risk and Sovereign Default Risk
- Economic and Financial Foundations of Country Risk Assessment
- Country Risk Assessment Methodologies
- Country and Sovereign Ratings and their Interpretations
- Risk Models for Sovereign Credit Risk
- International Portfolio Investment Analysis
- Hedging Country and Sovereign Risk
The recent European debt crisis has lead to a hugely increased focus on country risk in general and on sovereign credit risk in particular.
The purpose of this seminar is to give you a good introduction to country and sovereign risk and a good and practical understanding of tools and methods for assessing and managing these risks.
We start with a general introduction to country and sovereign risk. We define the concepts “country risk” and “sovereign risk”, and we explain the sources of these risk. We also give an overview of the role that country and sovereign risks have played in the current and historical financial crises (such as the Asian currency Crisis).
We then look at the economic and financial foundations of country risk assessment. We explain the debt dynamics and “events” such as debt restructuring, debt moratorium, and currency devaluation.
Further, we present and explain a number of country risk assessment methodologies, including the analysis of socioeconomic, fiscal and monetary variables. We also discuss how country and sovereign risks are reflected in country and sovereign credit risk ratings. We give examples of country and sovereign debt ratings and we discuss their impact on sovereign debt markets. We present some quantitative risk models for country and sovereign risk and explain how these models can be used in practice for calculating “Country VaR” and other risk measures.
Further, we look at the investment implications of country and sovereign risk. We explain how sovereign debt instruments affect the risk-return characteristics of an investment portfolio, and we demonstrate how to construct optimal portfolios that include government bonds.
Finally, we present and explain a number of tools for mitigating country and sovereign risk, including the use of national and multinational guarantees, future flow securitizations, and risk transfer with sovereign credit derivates.
The purpose of this seminar is to give you a good introduction to country and sovereign risk and a good and practical understanding of tools and methods for assessing and managing these risks.
We start with a general introduction to country and sovereign risk. We define the concepts “country risk” and “sovereign risk”, and we explain the sources of these risk. We also give an overview of the role that country and sovereign risks have played in the current and historical financial crises (such as the Asian currency Crisis).
We then look at the economic and financial foundations of country risk assessment. We explain the debt dynamics and “events” such as debt restructuring, debt moratorium, and currency devaluation.
Further, we present and explain a number of country risk assessment methodologies, including the analysis of socioeconomic, fiscal and monetary variables. We also discuss how country and sovereign risks are reflected in country and sovereign credit risk ratings. We give examples of country and sovereign debt ratings and we discuss their impact on sovereign debt markets. We present some quantitative risk models for country and sovereign risk and explain how these models can be used in practice for calculating “Country VaR” and other risk measures.
Further, we look at the investment implications of country and sovereign risk. We explain how sovereign debt instruments affect the risk-return characteristics of an investment portfolio, and we demonstrate how to construct optimal portfolios that include government bonds.
Finally, we present and explain a number of tools for mitigating country and sovereign risk, including the use of national and multinational guarantees, future flow securitizations, and risk transfer with sovereign credit derivates.
09.15 - 12.00 Financial Crises, Country Risk and Sovereign Default Risk
- Country and Sovereign Risk: Definitions, Terminology, Sources of Risk
- The European Debt Crisis and the Future of the Euro
- Sovereign Debt Crises – the Historical Perspective
- Solving Debt Crises – Debt Reduction Strategies and Instruments
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
12.00 - 13.00 Lunch
13.00 - 16.30 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 Study and Small Exercise
Country and Sovereign Ratings and their Interpretations
- Global Country Risk Ratings
- Specialized 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.)
- Case Study and Small Exercise
Friday, September 24
09.00 - 09.15 Brief Recap
09.15 - 12.00 Quantitative Risk Models for Country and Sovereign Risk
- Econometric and Mathematical Models
- Value-at-Risk
- 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 Study and Small Exercise
International Portfolio Investment Analysis
- Investment Risk
- 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 Small Exercise
12.00 - 13.00 Lunch
13.00 - 16.30 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 Securitizations to Mitigate County Risk
- Hedging Sovereign with Credit Derivatives
- Regulatory Aspects (Basel III, Solvency II etc.)
- Case Study and Small Exercise
Summary and Outlook
Evaluation and Termination of the Seminar
