Michel Henry Bouchet, Ephraim Clark, Bertrand Groslambert

Country Risk Assessment

A Guide to Global Investment Strategy

• Gebundenes Buch

Produktbeschreibung

One of the few books on the subject, Country Risk Assessment combines the theoretical and practical tools for managing international country risk exposure.

- Offers a comprehensive discussion of the specific mechanisms that apply to country risk assessment.
- Discusses various techniques associated with global investment strategy.
- Presents and analyses the various sources of country risk.
- Provides an in depth coverage of information sources and country risk service providers.
- Gives techniques for forecasting country financial crises.
- Includes practical examples and case studies.
- Provides a comprehensive review of all existing methods including the techniques on the cutting-edge Market Based Approaches such as KMV, CreditMetrics, CountryMetrics and CreditRisk+.

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Produktdetails

• Wiley Finance Series
• Verlag: Wiley & Sons
• 1. Auflage
• Seitenzahl: 288
• Erscheinungstermin: 18. Juli 2003
• Englisch
• Abmessung: 240mm x 161mm x 20mm
• Gewicht: 645g
• ISBN-13: 9780470845004
• ISBN-10: 0470845007
• Artikelnr.: 11407264

Autorenporträt

MICHEL HENRY BOUCHET is Professor of Finance at CERAM-Sophia Antipolis (France), Scientific Director of the MSc in International Finance, and Head of the Chair 'Global Finance'. He is also Managing Director of DEFI/Developing Finance, Paris. After an international banking career at BNP, the World Bank and the Washington-based Institute of International Finance, Dr. Bouchet was founder and CEO of Owen Stanley Financial, a specialized advisory firm dealing with debt restructuring strategy for country governments. Dr. Bouchet graduated in Economics from the University of Paris and IEP-Paris. He also holds an M.A. and a Ph.D from USC (Columbia-USA). EPHRAÏM CLARK is Professor of Finance at Middlesex University, London, and Visiting Professor at ESC Lille, France, with extensive teaching experience in Europe and the USA. He is Founding Editor of the European Journal of Finance, Co-editor of Treasury Affairs, and Associate Editor of the International Journal of Finance. Professor Clark is the author of eight books and over 50 articles in academic and professional journals in the field of international risk management, and he also has extensive experience in private business and as a consultant. BERTRAND GROSLAMBERT after working in Africa as Financial Controller with the French oil group, Total, Dr. Groslambert joined Paris-based FP Consult (now part of Fortis Group), an emerging market investment management company with a US$250 million portfolio. He was equity fund manager specializing in Latin American stock markets. Dr. Groslambert teaches International Finance Strategy and International Risk Management at CERAM. A graduate himself from CERAM, he holds a Doctorate in Economics from Aix-Marseille University, and his areas of expertise include emerging markets and international economics.

Inhaltsangabe

Preface ix
Acknowledgments xi
Foreword by Campbell R. Harvey xiii
1 Introduction 1
1.1 An historical perspective 1
1.2 Outline of the book 4
References 7
2 An Overview of Country Risk 9
2.1 A Review of the literature 9
2.1.1 The terminologies 9
2.1.2 Definitions of country risk 10
2.1.3 Sources of risk 13
2.1.4 Types of investment 13
2.1.5 The historical context 14
2.1.6 Different methodologies 15
2.2 Classification and examples of country risk 16
2.2.1 Natural disasters 16
2.2.2 Socio-political risk 17
2.2.3 Country-specific economic risk 22
References 25
3 The Economic and Financial Foundations of Country Risk Assessment 31
3.1 Devaluation 32
3.1.1 Relative price effects: The elasticities approach 32
3.1.2 Income effects: The absorption approach 33
3.1.3 Stock adjustments: The monetary approach 38
3.1.4 Stock adjustments: The portfolio balance approach 41
3.1.5 Country risk: Ratio analysis 42
References 47
4 Country Risk Assessment Methodologies: The Qualitative, Structural
Approach to Country Risk 49
4.1 Introduction 49
4.2 Analysis of welfare and social indicators of the development process 51
4.3 Analysis of the macroeconomic structures of growth 52
4.4 External indebtedness, liquidity and solvency analysis 57
4.5 The savings-investment gap and domestic financial intermediation 61
4.6 Growth, crisis and governance 63
4.7 The "qualitative" aggregate approach to political risk 69
4.8 Conclusion 72
References 75
5 Assessment Methodologies: Ratings 79
5.1 Global country risk ratings 79
5.1.1 Specialized ranking firms 79
5.1.2 Export credit agencies 88
5.1.3 Summary of global country risk ranking methods 90
5.2 Country credit ratings 93
5.2.1 Credit rating agencies 94
5.2.2 Fitch 94
5.2.3 Moody's 98
5.2.4 Standard & Poor's 101
5.2.5 Country rankings published in magazines 102
5.2.6 Summary of country credit rating methods 105
5.3 Conclusion 109
References 110
6 Econometric and Mathematical Methods 115
6.1 Discriminant analysis 115
6.2 Logit and probit models 117
6.3 Regression analysis and model building 118
6.4 Monte Carlo simulations 121
6.5 Value at risk (VaR) 122
6.5.1 VaR for a single-asset portfolio 123
6.5.2 VaR for a two-asset portfolio 123
6.5.3 Other methods for Estimating VaR 124
6.6 Principal components analysis 124
6.7 Non-linearities and non-parametric estimation 125
6.8 Artificial neural networks 127
6.9 Multicriteria 127
References 129
7 Risk Models 133
7.1 Credit risk 133
7.1.1 Probabilities of default using historical data 133
7.1.2 Probabilities of default using interest rate spreads 133
7.1.3 Probabilities of default using firm value 135
7.1.4 Countrymetrics 137
7.1.5 Loss given default 140
7.1.6 Credit value at risk 140
7.1.7 Credit VaR, default correlation and contagion 141
7.2 Investment risk 142
7.2.1 Adjusting the expected cash flows 142
7.2.2 Adjusting the discount rate 142
7.2.3 The Macro CAPM 144
7.2.4 Measuring political risk as an insurance premium 145
References 147
8 International Portfolio Investment Analysis 149
8.1 Modern financial theory 149
8.2 International portfolio investment and country risk management 154
8.2.1 The international portfolio investment panorama 154
8.2.2 Impact of country risk on international portfolio investment 155
8.2.3 International diversification 156
8.2.4 International Capital Asset Pricing Model 158
8.3 The Limits of the ICAPM 159
8.3.1 The normal distribution 160
8.3.2 Portfolio diversification 161
8.3.3 The CAPM 163
8.3.4 The Bank of America approach 163
8.3.5 The Goldman Sachs approach 164
8.3.6 The JP Morgan approach 165
8.4 Conclusion 165
References 166
9 Financial Crises in Emerging Market Countries: An Historical Perspective
171
9.1 Introduction 171
9.2 Historical perspective 174
9.2.1 Economic growth-cum-debt process 174
9.2.2 Bonds versus loans 174
9.2.3 The rising importance of commercial bank lending in the post-WWII era
175
9.2.4 The debt crisis and the market-driven menu approach 176
9.3 Solving the debt crisis 177
9.3.1 Phase I - Buying time with rescheduling 177
9.3.2 Phase II - The new money approach 178
9.3.3 Phase III - The official concerted approach to debt restructuring 179
9.4 Debt reduction instruments 185
9.5 The way forward in the early 2000s: Back to the 1890s? 188
9.5.1 The return of private capital flows 188
9.5.2 The return of bondholders 189
9.5.3 The rise in non-debt-creating flows 190
9.5.4 The emergence of structured financing 190
9.6 Conclusion 191
Appendix: The Brady Plan at work in EMCs 192
References 195
10 Country Risk and Risk Mitigation Instruments 197
10.1 Introduction 197
10.2 The role of national export credit agencies 198
10.3 The role of official multilateral risk guarantee institutions 201
10.3.1 The World Bank's co-financing program 201
10.3.2 The role of the International Finance Corporation 203
10.3.3 The role of MIGA (Multilateral Investment Guarantee Agency) 204
10.4 The risk mitigation role of public and private risk guarantee
institutions 204
10.5 The role of private providers of specialist insurance for country risk
205
10.6 The market-based "menu" approach 206
10.6.1 The rise of the London Club debt secondary market of emerging market
loans 208
10.6.2 Price developments 211
10.6.3 Technical supply and demand factors affecting debt prices 211
10.6.4 Debt conversion transactions 212
10.6.5 Mechanics of debt conversion 213
10.6.6 Range of debt conversion transactions 215
10.6.7 Official bilateral debt conversion 217
10.6.8 Debt conversion: A positive sum game? 218
References 220
11 Country Risk Assessment: A Matter of Information and Intelligence
Gathering 221
11.1 Introduction 221
11.2 Solvency and liquidity risk: The supply of debt-related information
223
11.2.1 Official sources of country risk data and information 223
11.2.2 Private sources of country risk data and information 234
11.3 FDI-related country risk assessment 239
11.3.1 The role of specialized country risk assessment companies 239
11.3.2 National public and private information sources 240
11.3.3 Think-tanks and risk analysis companies 241
11.4 Conclusion 243
Appendix: External debt, official information sources 244
References 245
Glossary 247
Index 265