Sovereign Risk Tool
A rigorous and transparent framework to measure and forecast the vulnerability of 166 countries to a sovereign crisis or a sovereign distress.
Oxford Economics' composite sovereign risk tool provides a rigorous and transparent framework to measure the vulnerability of 166 countries to a sovereign crisis or a sovereign distress. The indicator provides significant added value over sovereign credit ratings in predicting probabilities of default and is statistically proven to be a leading indicator for credit ratings. You may also be interested in our complementary service, the FX Risk Tool.
WHAT THE SERVICE INCLUDES
- Quarterly sovereign risk scores. Updated monthly, based on historical data from 2000 and Oxford Economics forecasts, which makes it a forward-looking indicator.
- Spreadsheet-based analytical indicator. Allows easy comparison of sovereign risk and its drivers (23 sub-components, based on about 40 series of underlying data) across countries, regions and time.
- Chartbook. Graphical presentation of the evolution of sovereign risk versus credit ratings and bond spreads (where available) for 123 economies, updated monthly.
- Expert support. Oxford Economics' risk-modelling team are available to answer questions about our forecasts and analysis.
METHODOLOGICAL HIGHLIGHTS
- Proven track-record in predicting the likelihood of a sovereign default or a distress episode.
- Based on the leading research on financial and sovereign crises.
- Forward-looking measure, using both established international data sources and Oxford Economics one-year-ahead forecasts for 166 countries, presented as a score from 1 to 10 (where 10 is high risk).
- Draws on the expertise of our team of 200 full-time economists, who monitor and scrutinise the data and the risk measures.
- Includes innovative measures of imbalances, such as risk-weighted public debt, which differentiates between the risk profiles of debt holders.
service application
Asset Managers
- Provides a transparent and unbiased alternative to sovereign credit ratings, a forward-looking and leading indicator that highlights sovereigns that are likely to be upgraded or downgrade.
- Helps make informed investment decisions, by identifying mispricing relative to a fundamental quality of a sovereign credit.
Corporates and banks
- Helps monitor the vulnerability of economies to a sovereign or balance sheet crisis, which could have devastating consequences for domestic demand or the solvency of their customers or counter-parties.
- Tracks the evolution of external imbalances, for use as an indirect measure of currency risk.
Central banks and governments
- Facilitates analysis of counterparty sovereign risk for the purposes of bilateral or multilateral lending.
- Independent benchmark of risk that can be used in relationships with sovereign credit ratings.
- Can be used as a policy tool by governments to reduce borrowing risks as our sovereign scores explain 60% to 70% of market pricing of sovereign bonds.
Oxford Economics' services are provided to clients for research purposes only and do not constitute a recommendation to sell or buy any security or currency of any of the countries mentioned therein. Oxford Economics is not a registered credit rating agency and does not provide an opinion regarding the creditworthiness of an entity, a debt or financial obligation, debt security, preferred share or other financial instrument, or of an issuer of such a debt or financial obligation, debt security, preferred share or other financial instrument. Oxford Economics research is published with the understanding that neither the analyst nor Oxford Economics are providing investment advice; anyone who needs investment advice should consult an investment professional.
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