Global Macro Service
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.
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.