Re: default risk

Jennifer Wu ( (no email) )
Wed, 18 Aug 1999 08:14:45 -0500

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I think that "default" here means "bankruptcy". Therefore, all government =
bonds have no default risk. The risk premium of long-term government bonds =
is for the risk of changing interest rate, as mentioned in the bottom of =
page 144: "By switching to long-term government bonds, the investors =
acquires an asset whose price fluctuates as interest rates vary."

>>> <Greg.Babushkin@mail.state.ky.us> 08/04 12:36 PM >>>
I have a question about "default risk" in beginning of chapter 7!

I can't really create a definition for this term - could somebody explain =
it
to me? And why Long term gov't bonds have no risk of default when there =
is
a 1.4% risk premium vs. Treasury bonds - I am a bit confused here!

Thanks

Gregory S. Babushkin
Property & Casualty
Kentucky State Department of Insurance
(502) 564-6046

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