Sovereign risk is a different type of credit risk that affects an FI that purchases bonds of foreign corporations and governments.

Question

Quizplus · Accepted Answer

Sovereign risk refers to the risk that a foreign government may not be able to meet its debt obligations, which could result in a default on its bonds. This can have a significant impact on FIs that invest in those bonds, as the value of the bonds may decrease and the FI may not receive the expected returns.

Sovereign Risk Is a Different Type of Credit Risk That