THE ANALYSIS OF COUNTRY RISK BY MEANS OF ALTERNATIVE METHODS

Abstract

There are many situations in which the country risk must be considered. Those situations could be when one wants to make an investment in another country; when a loan is given; or, even when a stronger and a more powerful economic union is desired. There are many ways to measure the country risk. These methods are created by central banks, rating agencies and international banking institutions. There is a new method the country risk can be measured, with the help of a financial instrument, derived from lending. This paper presents the bond between country risk and credit default swap. Because of the financial-economic crisis, the values of country risk fluctuated considerably, especially in those countries with a large public debt.

Keywords

• country risk
• derivative instruments
• country rating
• crisis
• default