Currency premium (货币风险溢价 huò bì fēng xiǎn yì jià) is identical to the country premium if that country’s currency is exclusively used by that country, i.e. aside from few special cases including (1) currency union, (2) fixed exchange rate pegs, or (3) pathologies, such as the phenomenon of dollarization. See “country premium”.
Part 1: Breakdown of Words
- “Currency” (货币 huò bì) as in “electronic currency” (电子货币 diànzǐhuòbì) or “legal tender” (法定货币 fǎ dìng huò bì).
- “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).
- “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.