financial 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 default risk or credit risk.

Use financial risk in a sentence

My loan was sold to a sub prime mortgage company because it was deemed to be a great financial risk.

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You need to make sure that you can handle any financial risk that you take on and that it can not break you.

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The return on the bond typically was correlated with the financial risk associated with the issuer. The higher the return, the greater the risk they would take on.

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Financial Risk Manager (FRM) total debt to total assets ratio