Default risk, also known as credit risk, is the risk associated with the possibility that a borrower or issuer of debt may be unable or unwilling to fulfill their financial obligations, including making timely payments on loans or debt securities. This risk is a concern for lenders and investors, as it can lead to financial losses and impact the overall stability of financial markets. Factors affecting default risk include the creditworthiness of the borrower, economic conditions, and the terms of the debt agreement. Mitigating default risk is essential for prudent lending and investment practices.
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