Country Risk
a.k.a. Sovereign risk
The risk that problems in a particular country, from politics to debt to sudden capital controls, hurt…
In plain English
The risk that problems in a particular country, from politics to debt to sudden capital controls, hurt investments tied to it.
Country risk bundles everything that can go wrong because of where an investment lives: war, elections, a debt default, sudden exchange controls, or a currency collapse.
It is why emerging-market currencies usually have to offer higher interest rates to attract money, and why they can crash when fear rises.
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