What is a Default Risk?
Default risk compensation refers to the compensation to investors for losses caused by the inability of the fundraiser to pay interest or repay the principal on time. In order to make up for the losses caused by default risks, investors demand higher returns.
Default risk reward
Right!
- Chinese name
- Default risk reward
- Definition
- Compensation to investors for losses
- issued
- Treasury coupons issued by the government
- Classification
- financial
- Default risk compensation refers to the compensation to investors for losses caused by the inability of the fundraiser to pay interest or repay the principal on time. In order to make up for the losses caused by default risks, investors demand higher returns.
- determining factors
- The magnitude of the default risk return depends on the creditworthiness of the borrowed money. If the borrower's creditworthiness is good, and the default capacity is small, the additional compensation required by the fund supplier is low: on the contrary, the fund supplier requires a higher default risk compensation. Treasury bonds are issued by the government and can be regarded as having no risk of default, and their interest rates are generally low. [1]
- The default risk of corporate bonds must be determined according to the creditworthiness of the enterprise. The creditworthiness of the enterprise can be divided into several levels. The higher the level, the better the credit, the lower the default risk, and the lower the interest rate level. Interest rates are naturally high.