RBC Sovereign Risk Heat Map

The Royal Bank of Canada (RBC) has seemingly created their own formula for assigning a number to the relative risk of sovereigns of default.

The formula isn’t given, but they’ve provided a chart indicating the results of their application of the formula:

Their formula ranks as the highest risk of default (in decreasing order) Ireland, Greece, Portugal, Britain and Italy.

This RBC risk evaluation formula, the details of which I don’t know, is an alternative to the formula for evaluating risk that I recently conjured. The RBC formula seems to involve more factors than my simplistic equation, though since we don’t know the formula itself we’re left to speculate.

My formula, the “future going burden” as I’ve coined it, is:

log(x * 2^y)

Future going burden calculation

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