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Default

• (1) The failure to pay interest or Principal promptly when due. (2) The failure to perform on a Futures Contract as required by an exchange. See also: Default Risk.

• Failure to make timely payment of interest or principal on a debt security or to otherwise comply with the provisions of a bond indenture.

• To default is to fail to repay principal or make timely interest payments on a bond or other debt investment security. Also, a default is a breach of or failure to fulfill the terms of a note or contract.

• Default refers to the inability of the borrowers to honor their promises.
Failure to make timely payment of interest or principal on a debt security or to otherwise comply with the provisions of a bond indenture.

• Occurs when a debtor fails to make interest or principal payments.

 
 Embedded terms in definition
 Bond indenture
Bond
Contract
Debt security
Debt
Default risk
Exchange
Fail
Futures contract
Futures
Indenture
Interest payments
Interest
Note
Principal
Risk
Security
 
 Referenced Terms
 Await instructions: Is the designation for a special pairing or matching of transactions. It also refers to additional handling instructions for a transaction for a specific account. These instructions supersede the standard or Default instructions.

 Bankruptcy risk: The risk that a firm will be unable to meet its debt obligations. Also referred to as Default or insolvency risk.

 Bond rating: Denotes the safety of the bonds. Probability of Default generally increases as the bond ratings decline. Bottom falls out as we go to below investment grade bonds. The highest bond rating is AAA followed by AA, A, and BBB. The lowest investment quality bond rating is BBB. All ratings below BBB are junk bonds. These are BB, B, and CCC. D denotes bonds that have already defaulted.An evaluation of the possibility of Default by a bond issuer, based on an analysis of the issuer's financial condition and profit potential. Bond rating services are provided by, among others, Standard & Poor's 500, Moody's Investors Service and Fitch Investors Service.

 Bond rating: Denotes the safety of the bonds. Probability of Default generally increases as the bond ratings decline. Bottom falls out as we go to below investment grade bonds. The highest bond rating is AAA followed by AA, A, and BBB. The lowest investment quality bond rating is BBB. All ratings below BBB are junk bonds. These are BB, B, and CCC. D denotes bonds that have already defaulted.An evaluation of the possibility of Default by a bond issuer, based on an analysis of the issuer's financial condition and profit potential. Bond rating services are provided by, among others, Standard & Poor's 500, Moody's Investors Service and Fitch Investors Service.

 Bridge bank: Is an organization which is created to serve as a vehicle to transport damaged loans or securities from an ailing financial institution. Often these nonperforming securities are package into securities or portfolios, which may be, acquired by turn-around specialists or vulture funds at significantly discounted prices. This activity can help improve the creditworthiness of the impaired financial institution because loans or securities in Default are no longer held by that institution. This frees up regulatory capital for other purposes and removes impediments for complying with various regulatory bodies and banking laws. It should be noted that from a banking, brokerage or insurance perspective, illiquid or defaulted loans and securities have substantially higher regulatory capital haircuts relative to most other liquid securities. See Special Purpose Vehicle.

 
 Related Terms
 Cross default
Default premium
Default risk
Events of default

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