Market Risk Transfer
The author argues that fiscal risks stemming from volatility in interest rates, exchange rates, commodity prices, and weather and geologic risks can be mitigated by transferring a portion of those risks to the market. Market risk transfer complements risk reduction measures (such as development of local capital markets and diversified production) and self-insurance, particularly in cases where balance sheet flows remain specifically exposed to market rates and movements, and when high cost, low-probability events present the risk of an economic or financial shock that cannot be absorbed internally. National risk management has tended to start with a focus on debt management and the need to evaluate and manage refinancing, interest rate, and currency risks. Recently, a number of countries—such as such as Mexico, Colombia, and Chile—have begun to take a more holistic view about sovereign risk management, now taking into consideration risks associated with commodity price shocks and natural disasters.
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| Format: | Working Paper biblioteca |
| Language: | en_US |
| Published: |
World Bank, Washington, DC
2013-11-12
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| Subjects: | volatility, risk transfer, risk reduction, derivatives, insurance instruments, securities and bonds, catastrophe bonds, interest rate risk, currency risk, commodity risk, natural disaster risk, |
| Online Access: | http://hdl.handle.net/10986/16335 |
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