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Definition of Default
Failure of a debtor to make timely payments of principal and interest as they become due.
Failure to make timely payment of interest or principal on a debt security or to otherwise comply
The failure by a debtor to make a principal or interest payment in a timely
A provision under which default on one debt obligation triggers default on another debt
A differential in promised yield that compensates the investor for the risk inherent in
Difference in promised yields between a default-free bond and a riskier bond.
Also referred to as credit risk (as gauged by commercial rating companies), the risk that an
Contractually specified events that allow lenders to demand immediate repayment of a debt.
The accumulated coupon interest earned but not yet paid to the seller of a bond by the
Creditors exchange the debt of one defaulting borrower for the debt of another
The risk that a firm will be unable to meet its debt obligations. Also referred to as default or insolvency risk.
Refers to the fact that the merger of two firms decreases the probability of default on
Assets than can be repossessed if a borrower defaults.
A pledge of property or other assets by a customer who is borrowing from a financial institution. Financial institutions require collateral as security in the event that the customer defaults on his/her loan.
The risk that the other party to an agreement will default. In an options contract, the risk
The process of analyzing information on companies and bond issues in order to estimate the
The risk that an issuer of debt securities or a borrower may default on his obligations, or that the
A statistical process that links the probability of default to a specified set of financial ratios.
1) A bond in default trades flat; that is, the price quoted covers both principal and unpaid,
The pledge of property and assets to secure a loan. Hypothecation does not transfer title, but it does provide the right to sell the hypothecated property in the event of default.
Commonly sold in the form of reducing term life insurance by lending institutions, this is life insurance with a death benefit reducing to zero over a specific period of time, usually 20 to 25 years. In most instances, the cost of coverage remains level, while the death benefit continues to decline. Re-stated, the cost of this kind of insurance is actually increasing since less death benefit is paid as the outstanding mortgage balance decreases while the cost remains the same. Lending institutions are the most popular sources for this kind of coverage because it is usually sold during the purchase of a new mortgage. The untrained institution mortgage sales person often gives the impression that this is the only place mortgage insurance can be purchased but it is more efficiently purchased at a lower cost and with more flexibility, directly from traditional life insurance companies. No matter where it is purchased, the reducing term insurance death benefit reduces over a set period of years. Most consumers are up-sizing their residences, not down-sizing, so it is likely that more coverage is required as years pass, rather than less coverage.
Perfected first lien
A first lien that is duly recorded with the cognizant governmental body so that the lender
In the event a person defaults on a loan, recourse is the right of a person to receive payment. Recourse could give the lender the ability to take possession of the borrowers assets.
Debt that, in the event of default, has first claim on specified assets.
Debt that has first claim on specified collateral in the event of default.
The risk that a central bank will impose foreign exchange regulations that will reduce or
default on a legal obligation of the firm. For example, technical insolvency occurs
Debt that does not identify specific assets that can be taken over by the debtholder in case of default.
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