The Greece bailout has elevated sovereign risk on the European continent and elsewhere.
The sovereign risk of the day was high: both the Bardi and the Peruzzi houses were felled when England's King Edward III defaulted.
"Their investments aren't purely commercial or about maximizing the value of their portfolio, " said Jan Randolph, head of Sovereign Risk at Global Insight in London.
"They will be getting terms usually given to poorer countries, " David Levey, managing director of sovereign risk at Moody's told the BBC's World Business Report.
The first is to take the sovereign risk of the country in which the borrower is based and put the bank into the next category down.
Portuguese banks have been frozen out of the capital markets because of a downgrading of the country's sovereign risk, making them dependent on funding from the European Central Bank.
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It was only late in the global crisis, when Greece admitted to lying about its numbers, that the markets woke up from their torpor into a sudden panic over sovereign risk.
Instead, investors should seek more timely measures of sovereign risk, preferably through price signals from competitive debt and credit default swap markets, and whenever those are unavailable, from more objective and transparent models.
In reality, investors shifted funds from higher-risk to lower-risk assets in response to European sovereign risk worries and apparent weakening in the U.S. economy, as well as uncertainty created by the U.S. downgrade.
You may think that the argument is a bit of a stretch at this point, since treasuries are fully backed by the U.S. government and rated AAA. Corporate bonds carry no such endorsement, so in essence I am exchanging sovereign risk for some broader risks such as credit, business and market risks.
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The plan evidently is to construe these entities as somehow separate from and outside of Russian government control or "sovereign" risk.
There is also a planned deterioration of sovereign debt risk as compared to market prices in early May, the Committee said.
After three yearly downgrades, Japan has a sovereign credit risk rating of Aa3 with a negative outlook, the worst rating among developed nations.
Bond investors have become choosier about sovereign credit risk, so some euro-area borrowers have had to stump up higher coupons for their recent bond issues.
In particular, attention has returned to sovereign credit risk, particularly in the eurozone and its periphery, where weaker countries, like Greece and the more indebted of the Central and Eastern European countries, are under pressure.
In a study last year, the International Monetary Fund concluded that ratings were a reasonably good indicator of sovereign-default risk.
Thus, any serious likelihood of sovereign restructuring would risk creating runs by creditors and, at worst, another leg of the global financial crisis.
The problem with these stress tests is that they assumed that 80 % of Greek sovereign debt was risk-free, as all other debt issued by Euro members.
Anxiety about sovereign-default risk, and the budget-cutting measures to counter it, will further sap the peripheral economies, thus raising the chances of big losses on the loans British banks have made there.
This indicates increased risk to sovereign bondholders, senior bank debt holders, and depositors across the Eurozone, particularly in fiscally constrained sovereigns.
But there is another, stormier possibility: that of renewed market turmoil caused by the risk of sovereign default or a euro-zone break-up.
Second, even if fully factoring in the risk of sovereign defaults is politically impossible, the issue needs to be dealt with convincingly.
Sustained deflation, Credit Suisse says, would put strains on public finances, increasing the risk of sovereign default, and making longer-term bonds less attractive.
If the CDS payout had not been triggered, the private sector investors would view the purchase of such sovereign debt as having significantly more risk, and that would result in a much higher interest cost of that sovereign debt to the issuing countries.
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The fund still avoids currency risk by buying sovereign debt and corporate debt priced in dollars.
However, Fitch said the risk of a sovereign default was "extremely low".
Since, for Korean banks, they are risk-free sovereign assets, the bonds are used to meet the bank's capital requirements and they are often held until maturity.
"The downgrade of Greece's sovereign ratings reflects the heightened risk that Greece may not be able to sustain its membership of Economic and Monetary Union, " Fitch said.
In March, when Mr. Buiter wrote that Spain was at "a greater risk of a sovereign restructuring than ever before, " Spanish officials castigated him at a public forum and called Citigroup to complain, according to people familiar with the situation.
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