Practical analysis for investment professionals
08 May 2012

Critical Factors for Evaluating Sovereign Credit

Posted In: Economics

At the 65th CFA Institute Annual Conference, Fitch Ratings Group Managing Director David Riley discussed the critical factors for evaluating sovereign credit. In particular, Riley drew upon lessons learned in the ongoing European sovereign debt crisis.

Here are some of the key questions he highlighted that are used by Fitch in evaluating sovereign credit:

  • Can a sovereign exercise primary authority over a recognized jurisdiction? More specifically, does it wield the power of violence? Can it collect tax? Does it have the ability to print money?
  • What is the probability of default on its public debt? In answering that question past defaults can be useful.

Read more on the Annual Conference blog →

About the Author(s)
Jason Voss, CFA

Jason Voss, CFA, tirelessly focuses on improving the ability of investors to better serve end clients. He is the author of the Foreword Reviews Business Book of the Year Finalist, The Intuitive Investor and the CEO of Active Investment Management (AIM) Consulting. Voss also sub-contracts for the well known firm, Focus Consulting Group. Previously, he was a portfolio manager at Davis Selected Advisers, L.P., where he co-managed the Davis Appreciation and Income Fund to noteworthy returns. Voss holds a BA in economics and an MBA in finance and accounting from the University of Colorado.

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