Risk Terms

Default Risk

Definition

What is Default Risk?

The risk that an issuer does not pay interest or principal when due.

Example in practice

A commercial-paper issuer misses its maturity payment, causing a direct loss or delayed recovery.

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The possibility of loss because broad market prices or rates move against an investment.

The possibility that a borrower or issuer will fail to make promised payments or suffer a downgrade.

The possibility that changing market interest rates will reduce an investment's value or income appeal.

A day on which relevant financial institutions and markets are open for normal processing.

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