How do you assess the impact of changes in geopolitical risks on fixed income investments?

Sample interview questions: How do you assess the impact of changes in geopolitical risks on fixed income investments?

Sample answer:

Assessing the Impact of Geopolitical Risks on Fixed Income Investments

1. Monitor News and Events:
– Stay updated on significant geopolitical developments, such as wars, political unrest, and trade disputes.
– Assess their potential impact on specific countries, regions, and global economic stability.

2. Analyze Sovereign Creditworthiness:
– Evaluate the creditworthiness of sovereign borrowers affected by geopolitical risks.
– Consider factors such as political stability, economic resilience, and foreign exchange reserves.
– Determine if the risks warrant a downgrade in credit ratings, which could impact bond prices.

3. Assess Corporate Exposure:
– Identify corporations with significant operations, assets, or revenue streams in affected regions.
– Evaluate their potential vulnerability to supply chain disruptions, political instability, or currency fluctuations.

4. Monitor Yield Spreads:
– Track the spread between yields on bonds issued by countries or corporations exposed to geopolitical risks and comparable bonds from less risky issuers.
– Widening spreads indicate increased investor concern and potential outperformance by safer investments.

5. Consider … Read full answer