Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.

Credit risk, also known as credit exposure, is the risk of a borrower defaulting on required payments, resulting in a loss to the lender. 

Credit risk definition

Credit risk, also known as credit exposure, is the risk of a borrower defaulting on required payments, resulting in a loss to the lender. Credit risk is a principal factor in determining the interest rate on a loan: the higher the perceived credit risk, the higher the rate of interest a lender will demand.
 

Credit risk is calculated based on the borrower’s ability to repay. It takes into account their collateral assets, their ability to generate revenue and their taxing authority. Time is also accounted for, with a longer-term loan usually indicating a higher credit risk.
 

Credit risk is a core component of fixed-income investments, as the yields of bonds are closely connected to the perceived risks. That’s why ratings agencies, such as Moody’s and Fitch, continuously evaluate the credit risks of thousands of issuers.

 

IG Smart Portfolios

Invest in an expertly managed portfolio, at a fraction of the cost of traditional wealth managers and independent financial advisors (IFAs), with an IG Smart Portfolio.

A - B - C - D - E - F - G - H - I - J - K - L - M - N - O - P - Q - R - S - T - U - V - W - Y

See all glossary trading terms