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Value-based assessment of sovereign risk

Eva-Maria Kalteier (Institute of Finance, University of Ulm, Ulm, Germany)
Stephan Molt (Landesbank Baden-Wurttemberg, Stuttgard, Germany)
Tristan Nguyen ((Graduate) WHL School of Business and Economics, Lahr, Germany)
Peter N. Posch (Institute of Finance, University of Ulm, Ulm, Germany)

Qualitative Research in Financial Markets

ISSN: 1755-4179

Article publication date: 29 July 2014



The purpose of this paper is to introduce a methodology to evaluate sovereign risk. Hereby, a value-based approach using different market measures is introduced.


This study’s approach aims to provide a value-based assessment of sovereign risk, combining market measures from government bond, credit derivatives and other markets as well as economic indicators.


The study finds that the assessment of sovereign risk is only possible when using information from different markets and adjusting according to the information included in these measures. Combining both market-based and economic information leads to a value-based evaluation of sovereign risk.

Practical implications

The practical implications are given for any institution with sovereign risk on their asset side. In fact, part of this research was done for the German Actuarial Foundation which uses the recommendations of this paper for the insurance industry.


The study’s approach is novel because it is the first to include several market-based and economic measures of a sovereign and combines it into a value-based assessment.



The authors would like to thank our anonymous referee, the editor Bruce Burton and participants of the Landesbank Baden-Württemberg (LBBW) seminars for helpful comments. The usual disclaimer applies.


Kalteier, E.-M., Molt, S., Nguyen, T. and N. Posch, P. (2014), "Value-based assessment of sovereign risk", Qualitative Research in Financial Markets, Vol. 6 No. 2, pp. 157-172.



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