[Solution]Estimating a lambda for country risk

Estimating a lambda for country risk Other things remaining equal, a company should be more exposed to risk in a country if it generates more…

Estimating a lambda for country risk
Other things remaining equal, a company should be more exposed
to risk in a country if it generates more of its revenues from that
country.
The easiest and most accessible data is on revenues. Most
companies break their revenues down by region. Therefore we can
calculate lambda as follows:

=

%.of .revenues.domesticallyfirm
%.of .revenues.domesticallyaverage.firm
There are two implications
A company’s risk exposure is determined by where it does business
and not by where it is located
Firms might be able to actively manage their country risk exposure
The post Estimating a lambda for country risk

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