The RISK of loss due to DEFAULT by a COUNTERPARTY on a direct extension of credit, such as a LOAN or DEPOSIT. Default on an unsecured direct credit risk transaction always results in a loss for the credit provider; this is in contrast to a situation involving TRADING CREDIT RISK , where the value of the contract may be in favor of the counterparty at the time of default. A subcategory of CREDIT RISK . See also CONTINGENT CREDIT RISK , CORRELATED CREDIT RISK , SETTLEMENT RISK , SOVEREIGN RISK .
Black’s Law Online Dictionary
