Credit Risk
a.k.a. Default risk
The risk that a borrower or trading partner fails to pay what it owes.
In plain English
The risk that a borrower or trading partner fails to pay what it owes.
Credit risk is the chance you do not get paid back. For a bondholder, it is the issuer defaulting. For a trader, it is your counterparty or broker failing.
Lenders demand higher interest to take more credit risk, which is why riskier borrowers pay higher yields.
Keep this word for good
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