What type of risk is illustrated by a country's action of expropriating natural resource assets?

The action of a country expropriating natural resource assets is a clear representation of political risk. Political risk refers to the uncertainty and potential financial loss investors or companies may face as a result of political actions taken by a government, such as nationalization, expropriation, or political instability. When a government takes control of privately-owned assets or resources, it can drastically affect the returns of investments and the viability of business operations within that country.

Political risk is particularly pertinent in emerging or politically unstable markets where government policies may change unexpectedly or may not align with favorability towards foreign investors. In the case of expropriation, investors may find their investments being seized without adequate compensation or recourse, leading to substantial financial distress and loss.

The other types of risk mentioned do not fit this scenario. Market risk pertains to broader economic factors affecting asset prices, credit risk relates to the potential for a borrower to default on a loan, and purchasing power risk involves the loss of value in money due to inflation. None of these directly relate to government actions like expropriation.