Term
| Country or Sovereign Risk |
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Definition
| The risk that a country may not honor its debt obligations or financial commitments. This could be due to several factors up to and including bankruptcy or changes in political leadership. |
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Term
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Definition
Risk that obligations will not be met and an entity will default on its obligations, resulting in a loss to the investor on the opposite side of the investment.
1. Credit risk is often discussed in relation to investors or their counterparties (forex dealers) failing to meet obligations.
2. It can also be discussed in relation to sovereign risk |
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Term
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Definition
The risk that fluctuations in currency exchange rates will have an adverse effect on investors or businesses.
This risk is more elastic in the long term |
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Term
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Definition
Risk that fluctuations in interest rates will have an adverse effect on an investor's investments.
Important when analyzing securities and products affected by rates which have longer maturities - T-bills & today's prices no typically affected
Impacts currency swaps, futures, options and forward outright contracts, but not a spot transaction |
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Definition
| Risk that a market for an investor's secuity or investment choice may not be readily available when the investor wants to buy or sell |
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Term
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Definition
| Risk that is carried by all securities and currencies traded within a given market. Can't be eliminated by diversification |
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Term
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Definition
| Risk associated with operating a business that are not attributable to outside forces. ex - problems will arise due to mechanical failures, human error, and other risks of a specific business in a specific location with specific equipment and specific employees |
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Term
| Settlement Risk and Herstatt Risk |
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Definition
| The risk that one party to a transaction will fail to deliver their end of the contract. Can be with goods but mostly associated with securites and currency transactions |
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