risk of default on a debt that may arise from a borrower failing to make required payments
Credit risk is the chance that a borrower does not repay a loan or fulfill a loan obligation. For lenders the risk includes late or lost interest and principal payment, leading to disrupted cash flows and increased collection costs. The loss may be complete or partial. In an efficient market, higher levels of credit risk will be associated with higher borrowing costs. Because of this, measures of borrowing costs such as yield spreads can be used to infer credit risk levels based on assessments by market participants.
Losses can arise in a number of circumstances, for example:
Discovered by embedding cosine similarity (sentence-transformers MiniLM, 384-dim).