The Global Risks Alliance (GRA)
Geopolitical shocks such as wars, sanctions, trade restrictions and abrupt policy shifts reach capital markets through prices, payment channels and the legal ability to hold or transfer assets. Cross-border holdings, foreign currency funding and dependence on foreign infrastructure determine how far a shock travels. This page sets out the transmission channels, how cross-border exposures are measured, and which institutions decide on the response.
GRA · Established · service level R0
Geopolitical risk in capital markets is the effect of wars, sanctions, trade restrictions and abrupt policy shifts on prices, payment channels and the legal ability to hold or transfer assets. Cross-border holdings and foreign currency funding carry these shocks between countries, and over time they can fragment markets.
How a failure at one financial centre can spread through settlement links. Design links, not real dependencies.
Cross-border exposures and market response. The dossier below sets out how the risk develops, what is measured, where the data come from, how it is modelled and who decides.
Uncertainty raises risk premia, volatility and demand for safe assets. Commodity and currency markets often move first, then the equities and credit of exposed sectors and countries.
Sanctions can bar transactions, freeze holdings and exclude institutions from payment and settlement systems. Holders may be unable to sell or receive payment, and infrastructures must manage positions that cannot settle.
Borrowers that fund in foreign currency face higher costs and shorter access when that currency appreciates or funding markets tighten. Portfolio outflows from emerging markets can be abrupt and broad.
Repeated shocks lead firms and states to reduce exposure to rivals, shift reserves and build parallel infrastructures. Fragmented markets can be less liquid and offer fewer ways to share risk across borders.
Each term as this page uses it. Where a standard-setting body defines the term, the wording follows that body.
| Term | Definition |
|---|---|
| Immobilised assets | Assets that cannot be transferred or used because of sanctions or legal restrictions. |
| Ultimate risk basis | Reporting exposures by the country of the guarantor or parent rather than the direct borrower. |
| Geopolitical risk index | A news-based measure of geopolitical tensions, such as that of Caldara and Iacoviello. |
Each indicator carries its unit, its cadence, the kind of source behind it and the evidence label a value would carry. No values are shown: a programme supplies them under its own authority.
| Indicator | Unit | Cadence | Source type | Label |
|---|---|---|---|---|
| Geopolitical risk index | index points | daily and monthly | News-based text index | MODELLED |
| Cross-border portfolio holdings by counterpart economy | currency units | semiannual | IMF Coordinated Portfolio Investment Survey | OFFICIAL |
| International bank claims by counterparty country | currency units | quarterly | BIS consolidated and locational banking statistics | OFFICIAL |
| Portfolio flows to emerging markets | currency units | weekly and monthly | Fund flow data and balance of payments statistics | REPORTED |
| Sovereign credit default swap spread | basis points | daily | Derivatives dealer quotes | OBSERVED |
| Currency composition of official reserves | share of allocated reserves | quarterly | IMF COFER | OFFICIAL |
| Assets subject to sanctions-related restrictions | currency units as reported | per publication | Authority and infrastructure disclosures | REPORTED |
The topic as a computational graph: named sources feed the methods, an evidence review gates the outputs, and the decisions stay with the authorities that hold them.
Fig. 02Nodes carry their type, two metric rows and a state; connectors show what feeds what; dashed frames name the owners; the timeline is the cadence. Design of the pipeline, not a record of a run.
Named public datasets and institutional records, each with its licence class. Sources by agreement are used only under their terms and never republished.
| Source | What it gives | Licence class |
|---|---|---|
| IMF Coordinated Portfolio Investment Survey | Cross-border holdings of equity and debt securities by holder and issuer economy | Free, IMF copyright and usage terms |
| BIS international banking statistics | Cross-border claims and liabilities of banks by counterparty country, on residence and ultimate risk bases | Free, BIS terms of use with attribution |
| IMF Currency Composition of Official Foreign Exchange Reserves | Currency shares of reported official reserves | Free, IMF copyright and usage terms |
| Geopolitical Risk Index by Caldara and Iacoviello | News-based measures of geopolitical risk, global and by country | Free for research with citation |
| OFAC Specially Designated Nationals list | Persons and entities subject to US sanctions | Public domain, US government records |
| EU consolidated list of financial sanctions | Persons, groups and entities subject to EU financial sanctions | Free reuse under the European Commission legal notice |
| IMF Global Financial Stability Report | Analysis of how geopolitical risk transmits to asset prices and capital flows | Free, IMF copyright and usage terms |
Capital Markets Nexus prepares evidence. The decisions below are taken by the authorities named, under their own rules, and never by the platform.
| Who decides | The question | Evidence this page serves |
|---|---|---|
| Governments and sanctions authorities | Which sanctions to impose and how to apply them in financial markets | Cross-border exposure and infrastructure dependency evidence from official sources |
| Central banks | Whether to provide foreign currency liquidity through swap lines or facilities | Currency funding indicators, the cross-currency basis and capital flow evidence |
| Securities regulators, exchanges and CCPs | Whether to suspend trading, adjust margins or change settlement arrangements after a shock | Volatility, liquidity and settlement evidence for affected instruments |
| Boards and investment committees of institutional investors | How to govern exposure to geopolitical risk within their mandates | Exposure measures and transmission channels described as context, not advice |
Geopolitical events change expectations about growth, inflation and policy, and raise risk premia. Commodity-exporting and importing economies are affected differently. Sanctions can freeze assets, cut institutions off from payment and settlement systems and force rapid unwinding of positions. Capital tends to flow towards assets perceived as safe, which can tighten financial conditions in emerging markets.
Fragmentation of trade and finance along geopolitical lines can reduce diversification and change long-standing correlations. Because such events are rare and diverse, historical relationships are a weak guide.
Mapping cross-border holdings and funding, using international statistics and financial economics and macro-finance. Data lag and miss indirect exposures.
Measuring market responses to past events, using econometrics. Each event is distinct.
Exploring transmission under hypothetical shocks, presented under scenarios. Scenarios are not predictions.
Tracing how shocks pass through payment and trade links, with network science and contagion.
The current service level is R0: information and enquiries. An enquiry receives a reference and names the next step; applications, payments, compute allocations and registrations open only when their team, terms and review capacity exist.