Country premium

Country premium, or country risk premium, (国家风险溢价 guó jiā fēng xiǎn yì jià) refers to differences in the risk attached to investing in different countries which share the same currency. For example, both Spain and Germany use the euro (€), however, there might be differences in the risk attached to investing in Spain and Germany.

Part 1: Breakdown of Words

• “Country” (国家 guó jiā) as in “Asian country” (亚洲国家 yà zhōu guó jiā), or “developing country” (发展中国家 fā zhǎng zhōng guó jiā).
  • “国” (guó) as in “motherland” (祖国 zǔ guó), “China” (中国 zhōng guó), “nationality” (国籍 guó jí), or “state-owned enterprise” (国企 guó qǐ).
  • “家” (jiā) as in “hometown” (家乡 jiā xiāng), “family” (家庭 jiā tíng), or “banker” (银行家 yín háng jiā).
• “Risk” (风险 fēng xiǎn) as in “risk averse” (风险规避 fēng xiǎn guī bì), or “risk assessment” (风险评估 fēng xiǎn píng gū).
  • “风” (fēng) as in “venture capital” (风投 fēng tóu), “windstorm” (风暴 fēng bào), or “style” (风格 fēng gé).
  • “险” (xiǎn) as in “insurance” (保险 bǎo xiǎn), or “danger” (危险 wēi xiǎn).
• “Premium” (溢价 yì jià; 溢 (yì), to overflow; 价 (jià), price) refers to an amount paid periodically to the insurer by the insured party in order to cover the risk of the insured party.
  • “溢” (yì) as in “overflow” (溢出 yì chū), or “spill over” (满溢 mǎn yì).
  • “价” (jià) as in “price” (价格 jià gé), or “value” (价值 jià zhí).