Credit Risk is the probability that a borrower—whether an individual, corporation, or government—will fail to meet its debt obligations and default on payments of principal or interest. In fixed income investing, credit risk is a primary concern, as it directly affects the safety of bond investments. Rating agencies like CRISIL, ICRA, and CARE Ratings assess credit risk and assign ratings to issuers. Higher credit risk demands a higher yield (risk premium) to compensate investors for the possibility of default.
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