Default Risk Definition

Default risk is the possibility that a borrower or issuer fails to meet its debt obligations.

What is Default Risk?

Higher default risk is typically associated with higher yields to compensate investors for the added uncertainty.

Credit ratings from agencies help investors gauge the relative default risk of different bonds or issuers.

A bond issued by a financially unstable company would generally carry higher default risk than one from a stable government.

Day trading is a strategy where positions are opened and closed within the same trading day.

A dealing desk is a broker execution model where client orders are processed internally rather than sent directly to external liquidity providers.

A debenture is a type of unsecured bond backed only by the general creditworthiness of the issuer rather than specific collateral.