Question

Give a short definition of the following terms

Credit Risk

Credit Report

Credit Score

Operational Risk

Interest Rate Risk

Liquidity Risk

Market Risk

Answer 1

Credit Risk: Credit risk the risk associated borrowers who fails to live up to his or her contractual obligations related to repayment principal and interest.

Credit Report: Credit report is a specific credit record which is maintained in relation to an entity or individual. It contains detailed credit past of the entity or individual.

Credit Score: Credit score is a numerical score assigned to an entity or individual based the credit history that represents the region of likelihood of default or no default of an entity or individual.

Operational Risk: Operational risk is risk which occurs due to system, process, people from internal or external factors.

Interest Rate Risk: The risk associated with change in interest rate which can impact investments / assets or liabilities directly or indirectly.

Liquidity Risk: Liquidity risk is risk which hampers ability of firm or bank to sell the assets quickly at fair price.

Market Risk: Market risk is risk relate to unfavorable price movements in assets and liability positions.