Credit risk

credit risk investment & finance definition
The risk that a party to a loan, trade, or financial transaction will not be able to pay for the transaction or repay the loan at maturity.
See credit risk in Wall Street Words ...

Credit risk
It’s the chance that a borrower won't repay what is owed. Bond-holders face this risk, too. So do investors in money market funds, which are short-term loans in the money markets.

Definition
Credit risk
An estimate of the probability that a borrower will not repay all or a portion of a loan on time. The risk that a loan will not be repaid.
RELATED TERMS ...

Credit Risk
The risk that a debtor will not repay; more specifically the risk that the counterparty does not have the currency promised to be delivered.
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Credit risk
Definition:
The Risk that an Issuer of Debt securities or a borrower may Default on its obligations, or that the payment may not be made On a Negotiable instrument. Related: Default risk. ...

Credit risk and market risk are closely tied together. You can view credit risk as the risk of default on a debt payment. Market risk premiums and prices increase as the perceived credit risk increases.

A credit risk is the amount of potential for default that is inherent in a given debt investment or extension of credit. A lender or an investor in various types of bonds carries a degree of credit risk on any transaction conducted.

Understanding Credit Risk
Credit ratings
A bond issuer's ability to pay its debts-that is, make all interest and principal payments in full and on schedule-is a critical concern for investors.

Credit risk - Credit risk can be controlled through research and diversification. Thorough research is very important particularly if you are deciding on adding corporate bonds to your portfolio.

Credit Risk - The idea that an outstanding currency position will not be repaid as agreed by the counterparty, either voluntarily or not. Also known as counterparty risk.

Credit Risk - The possibility that there may be a default by the issuer or other party in its financial obligations to the investor.

Credit risk or exposure: Credit risk refers to the risk of financial loss as a result of a credit rating downgrade or default of an institution or security issuer.

Credit Risk - Risk of loss that may arise on outstanding contracts should a counter party default on its obligations.
Cross deal - A foreign exchange deal entered into involving two currencies, neither of which is the base currency.

Credit risk. The possibility that an outstanding currency position may not be repaid as agreed, due to a voluntary or involuntary action by a counterparty.

Credit Risk " the possibility that companies or other issuers whose bonds are owned by the fund may fail to pay their debts (including the debt owed to holders of their bonds).

Credit risk: The amount of money you could lose as the result of a default by a counterparty. When making a loan, (or bond purchase), all the principal and accrued interest is at risk.

Credit Risk
The danger that a bond issuer's ability to repay what it owes will deteriorate.

Credit risk The possibility that a bond issuer will fail to repay principal and interest in a timely manner. Also called default risk.
Current maturity The length of time before a security matures.

Credit risk - The risk of default, in which a bond issuer may not make the complete payments. Any bond unit trust may risk loss from credit risk.

Credit Risk Risk that a borrower will not pay what is owed resulting in a loss to a financial institution.

Credit risk
Credit risk is the possibility that the issuer of a debt security will default, or fail to meet its obligation to make interest payments and repay principal to investors.

[edit] Credit Risk & Lack of Risk Metrics
ETNs, as debt instruments, are subject to risk of default by the issuing bank as counter party.

Credit Risk
The perceived financial risk that an debt will not be paid.
Credit Terms ...

"Credit risk" This is the risk that the issuers of the bonds owned by a fund may default (fail to pay the debt that they owe on the bonds that they have issued). This risk may be minimal for funds that invest in insured or U.S. Government bonds.

Finally, credit risk can also be mitigated through over-collateralization. In simple terms, the issuer of the bonds will sell the bonds at a discount to the value of the pool of mortgages.

Also referred to as credit risk (as gauged by commercial rating companies), the risk that an issuer of a bond may be unable to make timely principal and interest payments.
Deferred futures ...

credit enhancement The process of reducing credit risk by requiring collateral, insurance, or other... credit history A record of an individual's or firm's past borrowing and repaying behavior....

Morgan's preferred vehicle for transferring a significant amount of diverse credit risk to an SPV.
2. BIS Total Rip Off. An alternative definition of unknown meaning. BOBL German Federal Debt Obligations (BundesOBLigationen).

Dedicating a portfolioRelated: Cash flow matching Default riskAlso referred to as credit risk (as gauged by commercial rating companies), the risk that an issuer of a bond may be unable to make timely principal and interest payments.

Default risk Also referred to as credit risk (as gauged by commercial rating companies), the risk that an issuer of a bond may be unable to make timely principal and interest payments.

Credit Derivative - Privately held negotiable bilateral contracts that allow users to reduce their exposure to credit risk ...

The clearing corporation's elimination of such counterparty credit risk provides a great benefit to the futures and options markets. You may wonder how the clearing corporation does this.

Replacement risk : A form of credit risk that holds thatcounterparties of...
Repo : See Re-purchase.
Repo Rate : See Repurchase Agreement.
Report : French term for premium.
Repos : See Repurchase Agreement.

government, Treasurys are viewed as having no credit risk. They are issued as bills, which have maturities of one year or less; notes, which have maturities of two to 10 years; and bonds, which have maturities of 10 to 30 years.

Credit risk: if the issuer runs into financial difficulty or declares bankruptcy, it could default on its obligation to pay the bondholders.

With huge credit risk worries, make sure you understand how your fund is structured.

Credit Derivative: An over-the-counter (OTC) derivative designed to assume or shift credit risk, that is, the risk of a credit event such as a default or bankruptcy of a borrower.

Credit risk involves the ability of corporations, government entities, and even individuals, to make good on their financial commitments; market risk refers to the certainty that there will be changes in the Market Value of the selected securities.

CDOs represent different types of debt and credit risk. They are divided by the issuer into different tranches (or slices) and each tranche has a different maturity and risk that is associated with it: senior tranches (rated AAA in terms of safety), ...

It is also the process of putting various types of securities with different maturities into an investment portfolio, in order to reduce market and credit risk.

It therefore reflects the credit risk taken.
Yield spreads can also sometimes usefully be calculated for a sector, or between a particular bond and a basket of other bonds such as its sector.
Categories: ...

In a cashflow CDO, the underlying credit risks are bonds or loans held by the issuer. Alternatively in a synthetic CDO, the exposure to each underlying company is a credit default swap. A synthetic CDO is also referred to as CSO.

Bond Rating: evaluation of a bond issuer's credit risk (probability of default) by a nationally-recognized statistical rating organization (NRSRO) such as Duff & Phelps, Fitch Investors Service, Moody's Investors Service, and Standard & Poor's.

Credit risk refers to the credit rating of the instruments that debt funds invest in. Typically, debt papers are rated according to their ability to return the principal and make timely interest payments.

Credit default swaps are financial instruments that permit the trading of credit risks. They are essentially tradable insurance contracts used to hedge against the default of a borrower or similar credit instruments.
Credit rating ...

A type of credit score that makes up a substantial portion of the credit report that lenders use to assess an applicant's credit risk and whether to extend a loan.
FICO is an acronym for the Fair Isaac Corporation, the creators of the FICO score.

The exchange takes on the credit risk of the transaction. The risk to the holder is unlimited, and because the payoff pattern is symmetrical, the risk to the seller is unlimited as well.

Bonds can also be subject to other risk factors such as call and prepayment risk, reinvestment risk, event risk, liquidity risk, credit risk, inflation risk, yield curve risk, volatility risk and sovereign risk.

Our view is that we are entering a period of wholesale debt deflation and that is why assets with very little credit risk such as Gold and Oil and even Treasuries are being marked up.

Multibuyer policy
Ex-Im Bank program that provides credit risk insurance on export sales to many different buyers.

Company bonds that are rated as such are thought to be higher credit risks so to get investment money they have to offer a greater incentive. This term also is applied to companies who have unproven track records and no credit history.

Although you buy the STRIP (they come in other names also) from brokers and financial institutions, they still carry the full faith and credit of the U.S. government making them the safest of investments from a credit risk perspective.

Its two major functions involve market and credit risk assessment. The finance branch functions to manage the capitals of the company and to monitor the level of risk. Finally, the back office deals with transactions and conducts data checkups.

Normally the package secured by credit insurance (PMI) so the investors are safe from the credit risks of the individual mortgages in the portfolio. No protection provided against the cash flow and return volatility...

See also: Risk, Market, Investment, Interest, Securities