Transfer Risk

Transfer risk is the risk that a non-sovereign entity which is able and willingto service its foreign currency obligations cannot obtain the required currencyor cannot transfer this money to the receiver abroad. This transfer inabilityis caused by the imposition of restrictions on convertibility or capitaltransfers by the government. Transfer risk applies to all types of internationalinvestments especially in emerging market countries. Due to this it is moreimportant than ever in these days of globalization. The New Basel CapitalAccords require the consideration of transfer risk too. The author PhilippHauger describes the different types of risk occurring in international borrowingsand investments. The political and corporate determinants oftransfer risk are examined. The book illustrates the reasons why monetaryunions reduce the risk of a transfer event even though they have no influenceon the sovereign risk. In addition the author details how transfer riskis assessed by international professionals and describes two interesting approachesto estimate transfer risk in a quantitative way. This book is intendedfor professionals and students who are interested in the risks of internationalinvestments and for everybody working in international business who has todifferentiate between sovereign risk and the risk of a corporate default.