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Finance Dictionary and Glossary of Investment Terms
The risk that an issuer of debt securities or a borrower may default on its obligations, or that the payment may not be made on a negotiable instrument. Related: Default risk.
The possibility of a loss occurring due to the financial failure to meet contractual debt obligations.
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.
Itís the chance that a borrower won''t repay what is owed. Bond-holders face this risk, too. So do investors in money market funds, which are short-term loans in the money markets. But the risk is much greater for bondholders because the term of the debt is longer.