The risk that many borrowers in a particular country fail to repay their loans as a result of a recession in that country relates to

Question

Quizplus · Accepted Answer

Sovereign risk refers to the risk that a government may default on its financial obligations, which can cause a ripple effect on the economy and impact the ability of borrowers within the country to repay their loans. A recession in a particular country can increase the likelihood of the government defaulting and thus increase sovereign risk. This is different from credit risk, which relates to the risk of individual borrowers defaulting on their loans, currency risk, which relates to fluctuations in exchange rates, and liquidity risk, which relates to the ability to sell an asset quickly.

The Risk That Many Borrowers in a Particular Country Fail