What Is a Country Risk Premium?
The country risk premium is a function of the potential economic instability and political risk associated with a particular market.
Country risk premium
Right!
- Chinese name
- Country risk premium
- Attributes
- National bonds issued by each country
- Nature
- Currency stability
- Method
- Estimate the difference
- The country risk premium is a function of the potential economic instability and political risk associated with a particular market.
- measure
- The national risk premium is generally estimated based on the default risk premium of the national bonds issued by each country. Standard & Poor's, Moody's Investors Service, and Fitch IBCA all rank countries. These ratings are mainly used to measure default risk (not stock risk), but they are also affected by many factors that drive stock risk, for example, the currency of a country Stability, budget and trade balance, and political stability. The typical risk premium is estimated by observing the difference between the interest rate of bonds issued by a country on the same credit level and a certain risk-free rate (such as US Treasury bonds or German Euro interest rates). [1]