credit risk
Sign in to saverisk of default on a debt that may arise from a borrower failing to make required payments
Wikidata facts
- Subclass of
- financial risk
Show 3 more facts
- topic's main category
- Category:Credit risk
- studied by
- credit rating
- has cause
- credit
Sources (2)
via Wikidata · CC0
~13 min read
Encyclopedic overview
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:
Excerpted from Wikipedia’s “credit risk” article, available under the CC BY-SA 4.0 licence.