default risk


The possibility that a bond issuer will default, by failing to repay principal and interest in a timely manner. Bonds issued by the federal government, for the most part, are immune from default (if the government needs money it can just print more). Bonds issued by corporations are more likely to be defaulted on, since companies often go bankrupt. Municipalities occasionally default as well, although it is much less common. also called credit risk.

Use default risk in a sentence

There was a default risk, but not much of one because he had no history of ever defaulting on a payment.

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You should always make sure that you do not do anything that may put you at a default risk if you can avoid it.

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The borrower carried enough default risk that they decided they needed to increase the rate so they covered themselves for taking on the risk.

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