Finance

The ratings assigned by rating agencies to the bonds of non-central government issuers have a major impact on the rate premium that they are obliged…

Incident risk takes place that affects the interest and/or principal payments on bonds. There are many examples of this variety of risk but most analysts…

Exchange rate risk only applies in the case of bonds that are not denominated in the local currency of the holder. The holder has the…

Volatility risk only applies in the case of a called bond, as in the case of call risk. Volatility in bonds (i.e. the extent of…

Liquidity risk is the risk that a bond is sold below its true value, example, at a price that is lower than the prices of…

Reinvestment risk is the risk of investing the proceeds of called call bonds at lower rates and the investment, in the case of plain vanilla…

Call risk (or prepayment risk) applies to bonds that have call provisions, i.e. the issuers have the option to “call” (prepay) their bonds. The corollary…

Rating-downgrade risk is where the business of the issuer undergoes changing business conditions (or a “shock’) which leads to a downgrading by the rating agency/agencies.…

Credit risk is the risk of the issuer of the bond defaulting on its issued bonds, i.e. not being able to pay all or part…

Market risk (also incorrectly called interest rate risk) is the risk of bond rates rising and the holder making a capital loss. This is the…