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Global Banking$
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Roy C. Smith, Ingo Walter, and Gayle DeLong

Print publication date: 2012

Print ISBN-13: 9780195335934

Published to Oxford Scholarship Online: May 2012

DOI: 10.1093/acprof:oso/9780195335934.001.0001

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Assessing and Managing Risk in Global Banking

Assessing and Managing Risk in Global Banking

Chapter:
(p.302) Chapter 13 Assessing and Managing Risk in Global Banking
Source:
Global Banking
Author(s):

Roy C. Smith

Ingo Walter

Gayle Delong

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780195335934.003.0013

Future cash flows can be impaired by economic or political events. This chapter discusses the two components of country or cross-border risk, namely economic and political risk. Evaluating country risk is difficult, but building country assessments into the design of international exposure portfolios that are in some sense “efficient” is even more complicated. Neither the risks nor the returns are clearly definable, and even exposure measurement is a difficult task. Portfolio ideas can contribute importantly in clarifying the overall risks. The development of informational and assessment capabilities as part of the country evaluation process can itself lead to improved international exposure decisions that implicitly embody portfolio concepts. The application of these concepts also helps pin down the link between risks and pricing of international loans and bonds.

Keywords:   country risk, cross-border risk, economic risk, political risk

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