The country risk for Romania

Fratostiteanu, Cosmin and Tanasie, Anca (2007): The country risk for Romania.

Abstract

The administration of a financial activities portfolio usually generates two categories of risks: the risk exposure and the market risk. The purpose is to present the evolution of the country risk of Romania through using the specific statistic indicators with the granted classification by the main rating agencies. The risk exposure is the result of credit activity to a public debtor (in this case, a country), this activity being applied by banks at international level. From this point of view, the analysis of the country risk must offer information on the base of which the banks can establish the upper limits of exposure to a country and can monitories as possible in real time, the exposure to the respective country. The market risk appears as a result of unfavorable changes that may appear in a country’s financial market and that may affect the performance of activities that compose the portfolio of a bank, which has an exposure in relations with the respective country. In the literature approaching the country risk, the market risk is as inexistent or it is treated with superficiality, although it constitutes a fundamental component of the banking risk, concerning the development of the activities that unfold on these markets. From this perspective the approach of the country risk is insufficient and the developed methodologies must be extended through including this last aspect. But this paper does not purpose to introduce new components in the methodologies of analysis concerning the country risk and the market risk. The administration of a financial activities portfolio usually generates two categories of risks: the risk exposure and the market risk. The purpose is to present the evolution of the country risk of Romania through using the specific statistic indicators with the granted classification by the main rating agencies. The paper has three principal parts - the first tries to familiarize the reader with the definitions and the fundamentals of the country risk analysis, the second presents the statistic indicators and methods used in the assessment of the country risk and the third focuses on the Romanian case.

• Item Type: MPRA Paper
• Language: English
• Keywords: counytry risk, Romania, evaluation methods
• Subjects: F - International Economics > F0 - General > F02 - International Economic Order and Integration; F - International Economics > F3 - International Finance

References

1. *** - Romania’s Statistic Yearbook A995-2004, Romanian National Statistics Institute, Bucharest, 1996-2004 2. Calverley, John – “Country Risk Analysis”, Butterworth, London, 1985, Second Edition, 1990; 3. Campbell, Y., John - “The Econometrics of Financial Markets”, Princeton University Pr., 1996; 4. Carol, Alexander (Editor) – “Risk Management and Analysis. Volume 1: Measuring and Modeling Financial Risk”, John Wiley & Sons, 1998; 5. Hoti, Suhejla; McAleer, Michael - “An Empirical Assessment of Country Risk Ratings and Associated Models”, Department of Economics, University of Western Australia, revised: June 2003; 6. Siriopoulus, C. –“Topics in Financial Economics and Risk Analysis”, First edition, Thessaloiniki, Greece, 1999; 7. Tudoriu, T. – “Riscul de ţară, aspecte teoretice şi abordări metodologice comparate”, Editura Lucreţius, Bucureşti, 1998; 8. Tövissi, L.; Vodă, V. - „Statistic methods”, Editura Ştiinţifică şi Enciclopedică, Bucureşti, 1982; 9. Voican, Răzvan – “The Rating Agencies Still See Romania One Step Behind the 1996 Level”, Ziarul Financiar, nr. 894, 2002