CFA CFA Level 1 credit risk versus default risk/premiums

credit risk versus default risk/premiums

  • This topic has 1 reply, 2 voices, and was last updated Apr-18 by tkt.
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    • googs1484
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      I know this is elementary but for whatever reason some of the basic stuff I’ve lost in learning the complicated things. Credit risk, is composed of 3 other types of risks, maturity, default and liquidIty. Credit risk plus real rate and inflation is the expected rate of return. Is that right? 

    • tkt
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      Acccording to the CFA Curriculum:

      Required rate of return on a security = real risk-free rate + inflation premium + default risk premium + liquidity risk premium + maturity risk premium.

      The CFA Curriculum didn’t categorize “default + liquidity + maturity” as credit risk, so I couldn’t comment if that’s right.

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