Investment risk
Investment risk

This free course is available to start right now. Review the full course description and key learning outcomes and create an account and enrol if you want a free statement of participation.

Free course

Investment risk

3.5 Default or credit risk

This is the risk that contractual returns will not be paid because the borrower's financial situation has deteriorated to the point that it is no longer able to service the debt. It is possibly the commonest type of risk in commerce generally, and you are probably familiar with it in some shape or form. It affects many areas of business decision-making over and beyond the specialised world of investment risk and return. Most large companies devote significant resources to the identification, control or elimination of credit risks incurred in the normal course of their trading activities. What gives it a special dimension in the investment context is the issue of maturity, noted in Section 3.2. Making a long-term loan to a company clearly poses a greater credit risk than granting the company normal 30-day credit terms for the supply of goods and services. Not surprisingly, the analysis of borrowers’ long-term creditworthiness is a big business in itself.

B821_1

Take your learning further

Making the decision to study can be a big step, which is why you'll want a trusted University. The Open University has 50 years’ experience delivering flexible learning and 170,000 students are studying with us right now. Take a look at all Open University courses.

If you are new to university level study, find out more about the types of qualifications we offer, including our entry level Access courses and Certificates.

Not ready for University study then browse over 900 free courses on OpenLearn and sign up to our newsletter to hear about new free courses as they are released.

Every year, thousands of students decide to study with The Open University. With over 120 qualifications, we’ve got the right course for you.

Request an Open University prospectus