Currency Risk
The risk of loss due to fluctuations in exchange rates. Currency risk is a concern for companies that operate internationally or have foreign currency-denominated assets or liabilities.
Credit Spread
The difference in yield between two fixed-income securities with similar maturities but different credit ratings. Credit spreads reflect the relative creditworthiness of the issuers and the perceived risk of default
Credit Rating
An assessment of the creditworthiness of a borrower or issuer of debt securities, based on its ability to repay its debts. Credit ratings are assigned by credit rating agencies such as Standard & Poor’s, Moody’s, and Fitch
Credit Default Swap
A financial derivative that allows investors to hedge against the risk of default on a debt instrument or loan. In a CDS contract, the buyer pays a premium to the seller in exchange for protection against default
Counterparty Risk
The risk that a party to a financial transaction will default on its obligations. Counterparty risk is a significant concern in derivatives markets and other over-the-counter transactions.
Cost of Capital
The weighted average cost of a company’s debt and equity financing, used to evaluate the feasibility of investment projects and make capital allocation decisions. The cost of capital represents the minimum return required by investors to compensate for the risk of investing in the company
Corporate Bond
A debt security issued by a corporation to raise funds for business operations, expansion, or acquisitions. Corporate bonds typically pay a fixed or variable rate of interest and have maturities ranging from one to 30 years
Commercial Paper
Short-term debt securities issued by corporations to raise funds for day-to-day operations. Commercial paper typically has a maturity of less than 270 days and is sold at a discount to face value.
Collateral
Assets pledged as security for a loan or other financial obligation. Collateral provides lenders with a form of protection in case the borrower defaults on the loan.
Cash Flow
The movement of money into and out of a business. Cash flow is a critical measure of a company’s financial health and its ability to meet its short-term obligations.