Sovereign risk differs from credit risk because it is dependent on the financial status of the government rather than the counterparty itself.

Name: Sovereign risk differs from credit risk because it is dependent on the financial status of the government rather than the counterparty itself.
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Sovereign risk is specifically related to the risk of a government defaulting on its obligations, whereas credit risk generally pertains to the risk of any borrower defaulting on their obligations.

Sovereign Risk Differs from Credit Risk Because It Is Dependent