Business: Two risks involved in making loans to borrowers based in foreign countries are foreign exchange risk and sovereign risk.
Foreign exchange risk is the risk that one currency will fall or rise against another. This includes erosion (inflation); the value of the funds lent to a borrower becomes worth less, which can also be called Purchasing Power Parity (Saunders & Cornett, 2008). Foreign exchange risk also includes Interest Rate Parity risk, which means “the hedged dollar return on foreign investments just equals the return on domestic investments” (Saunders & Cornett, 2008, p. 445).
Sovereign risk is the risk that a foreign government may delay, or not allow a domestic company to pay their debts. When a countries economy weakens, a government can announce a debt moratoria, which is a delay in repaying interest and/or principle on debt” (Saunders & Cornett, 2008, p. 451). A government can also repudiate debt, which is an outright cancellation of all of a borrower’s current and future debt (Saunders & Cornett, 2008).
Saunders, A. & Cornett, M. (2008). Financial Institutions Management: A Risk Management
Approach. 7th Edition. McGraw-Hill-Irwin.
Try it now!
How it works?
Follow these simple steps to get your paper done
Place your order
Fill in the order form and provide all details of your assignment.
Proceed with the payment
Choose the payment system that suits you most.
Receive the final file
Once your paper is ready, we will email it to you.
Australia Assessments has gained an international reputation of being the leading website in custom assignment writing services. Once you give us the instructions of your paper through the order form, we will complete the rest.
As we work towards providing the best custom assignment services, our company provides assignment services for any type of academic essay. We will help you develop professionally written essays that are rich in content and free from plagiarism.
Admission and Business Papers
Our skilled team of professional writers will ensure that we help you craft a remarkable admission essay for your desired Master's program in your institution of choice. We won't stop there. Once you enter the job market, we will be available to secure you a position at your desired worksite by creating an outstanding portfolio or resume.
Editing and Proofreading
Our editorial team is always available for all editing and proofreading services. They check completed papers by our writers and also provide professional opinions to papers completed by our clients.
We harbor professional academic writers with different qualifications in diverse academic fields. As such, we are capable of handling both simple and technical papers. Ensure that you provide us with correct and complete instructions in the order form.