Objective

The overall goal of this two day intermediate level workshop is for participants to have a structured approach to the analysis of sovereign and country risk in both mature and developing markets. Specifically, the workshop will equip participants to:

• Understand the key drivers of country and sovereign risk in both mature and emerging markets
• Identify qualitative, quantitative and market indicators of vulnerability
• Recognise the impact of sovereign support and country risk on other exposures, including public sector entities
• Review the lessons learned from the current Eurozone and previous crises in various regions of the world.

Analytical Overview

Section aims: to distinguish between sovereign and country risk and understand how the rating agencies and other analysts assess these risks. Review the causes and effects of past and recent sovereign crises and use market prices to indicate credit perception. Apply a structured approach to understand sovereign debt issuance and payback.

Historical context

• History of sovereign default and crisis
• Case study: analysing the differing causes of two major sovereign defaults
• Current and previous economic crises: causes, effects and differing impact on mature and emerging markets
• Sovereign issuer analysis vs. country risk encompassing private sector
• Role of IMF and other multilateral bodies.

Perspectives on analysis

• Rating agency sovereign methodology, capacity and willingness to service debt, foreign and local currency ratings
• Transfer and convertibility risk: FX and local currency ratings, country ceilings
• Market indicators: CDS, bond and equity indicators
• Exercise: determining implied ratings from bond prices
• Structured approach to analysis: purpose, payback, risks and structure
• Exercise: review of varying sovereign and country risk exposures.