Emerging Market Risk Analysis

Emerging Market Risk Analysis

Euromoney Training
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Description

A 4-day expert practical workshop designed to equip delegates with the skills to analyse and mitigate country risk, including: How debt market participants measure and price country risk Understand the circumstances and factors that drive country defaults Identify the key factors behind geo-political risk Compare the risk analysis of emerging countries with that of developed markets Why banking and financial systems are an essential ingredient in the analysis Assessing the risks in sub-sovereign counterparties and borrowers New developments in the ‘sovereign ceiling’ concept Course Level With special reference to emerging and developing markets, this practical training course examines sophis…

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A 4-day expert practical workshop designed to equip delegates with the skills to analyse and mitigate country risk, including: How debt market participants measure and price country risk Understand the circumstances and factors that drive country defaults Identify the key factors behind geo-political risk Compare the risk analysis of emerging countries with that of developed markets Why banking and financial systems are an essential ingredient in the analysis Assessing the risks in sub-sovereign counterparties and borrowers New developments in the ‘sovereign ceiling’ concept Course Level With special reference to emerging and developing markets, this practical training course examines sophisticated risk assessment and analytical techniques used by leading market analysts, including the rating agencies. These include a structured methodology for assessing the strength/weakness of a country's financial system, as well as techniques to factor in new risks linked to the changing role of the IMF and other multinational agencies. Delegates will examine in detail the different analytical techniques used for emerging markets and developed countries, in particular with regard to anticipating changes in credit profile of countries, also as assessed by other market participants including the international rating agencies. The use of data sources will be discussed, as will the use of quantitative modelling techniques for risk and portfolio management.. The course is designed for professionals in financial and corporate institutions who need to better understand the risks and opportunities of operating and investing in emerging markets. Case studies will be drawn from Eastern Europe, Latin America, and Asia, and selected comparisons made with industrialised countries.
Day 1 Sovereign debt, issuance patterns, investors and the market Course overview; definitions Sovereign debt issuance, historic patterns Local currency vs. foreign currency debt issuance characteristics The investors in sovereign paper and their requirements Case studies: Government of Canada; investors in Latin American debt The country risk spectrum – beyond bond - Deposits - Trade finance - Profit and dividend repatriation Case study: Russian trade finance debts Economics, econometrics and risk – the analysis The economic model - Central planning - Economic liberalisation - Capitalist - Transition Case studies: New Zealand; Czech Republic; Brazil The credit analysis: analytical inputs Comments on the importance and limitations of the statistical approach Qualitative inputs - Social structures - Political system - The power base - Stability and predictability of responses Sources of analytical data and information Case study: Turkey Quantitative inputs The fiscal position Monetary policy Indebtedness: domestic and the external position Foreign currency reserves Balance of payments Case study: China Other inputs The exchange rate system; currency boards Public sector vs. private sector institutions Domestic regional factors; sub-sovereign financial structures Supranational relationships – the IMF, EU, other supporting bodies Case studies: Italy, Poland, China, India, Mexico, Argentina metrics compared Structuring a sovereign analysis: putting the pieces together Day 2 Other drivers of risk Off balance sheet items for sovereigns – disclosed and undisclosed; actual and contingent The financial system Private capital flows – the hazards and the benefits; controls and regulation The dangers of ‘moral hazard’ Case studies: Iceland; Kazakhstan; the United States, the Asian financial crisis Some econometric approaches to country and political risk assessment Use of historical data – risk premia, debt levels Vulnerability indicators; discounted cash flow measures Use in portfolio management Credit ratings; what they mean and how they are determined What are ratings How rating agencies assess sovereign risk The relationship between bond yields and country ratings How accurate are ratings? Who measures this? Country ratings vs. corporate ratings – different scales? Disagreements between agencies; controversial rating decisions Does the rating business have a viable future? The regulatory imperative. Country defaults – the special nature of sovereign defaults, and remedies for creditors Historical patterns of default: the ‘serial defaulter’ Legal issues: court judgements, sovereign immunity The rescheduling of sovereign debt Forced debt exchanges Local currency vs. foreign currency treatments Recovery rates on defaults Case study: Argentina Day 3 Financial institutions analysis: banks and the financial system The role of the institution in the system Emerging market vs. developed markets issues Franchise value The payments system The "too big to fail" concept Case study: Korea and its banks Management and financial fundamentals CAMELS topics, stressing: - Analysing the quality of capital - Loan diversification vs. concentration - NPL resolution techniques and hazards - Market risk and how to assess it - The importance of core earnings - Liquidity – funding structures, and the role of the market / central bank Case study: Analysis of an emerging market banking System Other analytical issues Capital and regulation: domestic and international; Basel I and II Anti-money laundering compliance Non-credit business lines: capital markets, investment banking, trust and fiduciary businesses The importance of ownership Government involvement and ownership in financial systems; directed lending The globalisation of banking – hazards Analysing diversified and multinational banking groups: a support for country risk, or a source of instability? Institutional and systemic failure Financial institution failure: historical trends and recent Developments Case study: The current global financial system crisis and country risk Banking crises and country risk, causes and costs: the historical experience and lessons for the future: - Emerging markets - Developed economies Case studies: the United States 1989 and 2008; CEE countries; Thailand; Scandinavia Day 4 Major case studies A group of major case studies, selected from both developed and emerging/transitional economies, utilising qualitative and quantitative risk factors and developing a complete risk assessment framework. Country risk diversification and correlation Hedge funds: did they trigger the Asian crisis? Russia and Long-Term Capital Management: the link Hazards of correlation; assembling a diversified country risk portfolio The analysis of sub-sovereign issuers and their risk Analytical principles Subsovereign debt issuance trends Some legal issues Off-shore banking centres The special characteristics of off-shore banking centres Assessing transfer risk Country ceilings: country risk and transfer risk – the evolution of a concept The relationship between the government’s credit quality and that of other major borrowers in the country Historic evolution of the ‘country ceiling’ Structuring transactions that attempt to avoid country risk Recent developments in transfer risk and sovereign moratoria – increasing pragmatism of sovereigns. Case studies: LatAm oil deals; Indonesia; Pakistan; Uruguay Course summary and close
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