Sovereign bonds, Financial Management

Assignment Help:

There are two major factors to be considered while analyzing sovereign bonds. They are: economic risk and political risk. Economic risk is all about the ability and the willingness of the government to satisfy its obligation. Analysts have to perform both qualitative and quantitative tests to analyze economic risk.

The two ratings assigned to a national government are local currency debt rating and foreign currency debt rating. Historically, the default rate on foreign currency debt is higher compared to the local currency debt rating. For a local currency debt rating, the government depends on the taxes and the financial system of its country but with the latter, the government has to purchase foreign currency to meet its obligation. Any depreciation in local currency would affect the government's ability to meet its obligation.


Related Discussions:- Sovereign bonds

What are the needs for financial statement analysis, Q. What are the needs ...

Q. What are the needs for financial statement analysis? The financial statements are to be studies for the following purposes. a) To make comparisons between two sets of fin

What do you mean by accrued expenses, Q. What do you mean by Accrued Expens...

Q. What do you mean by Accrued Expenses? Accrued expenses are the expenses which have been incurred but not yet due and hence not yet paid also. These simply represent a liabil

Types of frns, Types of FRNs In an era of innovations, while changing n...

Types of FRNs In an era of innovations, while changing needs and preferences of the investors trigger introduction of newer FRNs, the borrowers' funding specifications also nec

Theoretical spot rates, The theoretical spot rates for treasury secur...

The theoretical spot rates for treasury securities represent the appropriate set of interest rates that should be used to value the risk from default-free cash fl

Embedded options, Embedded Options  is a provision in the ind...

Embedded Options  is a provision in the indenture that gives the issuer and/or the bondholder an option to take action against the other party.

London interbank offered rate (libor), London Interbank Offered Rate (LIBOR...

London Interbank Offered Rate (LIBOR) This is the base lending rate which is charged by banks in the London Eurocurrency market. LIBOR is the European equivalent of the U.S. pr

Determine the distribution to minimize the total cost, A pharmaceutical com...

A pharmaceutical company, named "XYZ", plans to deliver trials to three different clinics (C1, C2, and C3). The trials are used for the emergency treatments so XYZ must fulfill all

Skills, what are some of the skills in asmall scale business

what are some of the skills in asmall scale business

State the economic conditions of cost of capital, State the economic condit...

State the economic conditions of cost of capital General economic conditions These include demand for and supply of capital within the economy and level of expected inflatio

Return enhancement on investment, Return Enhancement can be explained...

Return Enhancement can be explained using following heads: Use of a Valuation Model: An investor having access to a bond valuation model can bu

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd