A RISK ANALYST IS ANALYZING SEVERAL INDICATORS FOR A GROUP OF COUN...

16.

A risk analyst is analyzing several indicators for a group of countries. If he specifically considers the Gini

coefficient in his analysis, in which of the following factors is he most interested?

a.

Standard of living

b.

Peacefulness

c.

Perceived corruption

d.

Income inequality

Correct Answer: d

Rationale:

The Gini coefficient is commonly used to measure income inequality on a scale of zero to one, with zero

being total equality and one being total inequality. Therefore, nations with lower Gini coefficients have a more even

distribution of income, while higher Gini coefficients indicate a wider disparity between higher and lower income

households.

Section:

Valuation and Risk Models

Reference:

Daniel Wagner, Managing Country Risk: A Practitioner’s Guide to Effective Cross-Border Risk Analysis,

chapter 4, “Country Risk Assessment in Practice.”

Learning Objective:

Describe alternative measures and indices that can be useful in assessing country risk.

2015 Financial Risk Manager (FRM®) Practice Exam