Credit risk is the potential of a borrower to default on their debt obligations. Agency Trading It can arise from both individual and corporate borrowers, as well as other entities such as governments or financial institutions. The level of credit risk an investor is willing to take will depend on the type of debt being issued and the specific financial situation of the issuer. TrueForex Funds In order to limit credit risk, lenders and investors often require collateral or some form of security in exchange for a loan. Additionally, lenders may also utilize credit ratings or scoring models which help provide an indication of the borrower’s likelihood to repay their debts. Stop-loss Orders Ultimately, understanding and managing credit risk is essential for any lender or investor looking to make sound investments that generate returns with minimal risk.
