A practical approach for quantifying country risk

Jaime Sabal Cárdenas

Research output: Not indexed journal articleArticle


In most emerging market valuations a country risk premium is added to the CAPM discount rate of an equivalent investment in a developed market. However, this is not only a flawed procedure but also it is extremely difficult to gauge how country risk might affect the discount rate. In this paper a practical method is proposed to appraise country risk mainly through its impact on projected cash flows, leaving its possible effect on the discount rate as a secondary consideration.


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