aswathdamodaran.blogspot.com · 2020-02-19 · 2297d

Data Update 4: Country Risk and Currency Questions

This article examines how country risk and currency risk affect valuation and investment decisions for multinational companies and investors. The author provides frameworks for measuring country risk through scores, sovereign default spreads, and equity risk premiums, then separately addresses how to estimate risk-free rates across different currencies using government bond rates or synthetic approaches based on inflation differentials.

5 metrics· Cited 0× in the knowledge base ·Open source ↗

Metrics in this report

Base Equity Risk Premium

5.20%percent

S&P 500 at start of 2020

Default Spread for Ba2 Rating

2.51%percent

India local currency sovereign bonds, January 2020

Default Spread for Baa2 Rating

1.59%percent

Brazil local currency sovereign bonds, January 2020

Risk-Free Rate in Brazilian Real

4.26%percent

Derived from government bond rate minus default spread, January 1, 2020

Risk-Free Rate in Indian Rupees

4.95%percent

Derived from government bond rate minus default spread, January 1, 2020