Risk Terms

Downgrade Risk

Definition

What is Downgrade Risk?

The risk that a credit-rating reduction causes a security's price to fall or become ineligible for some portfolios.

Example in practice

A pension fund must sell a bond after it loses investment-grade status.

Keep learning

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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