Friday, June 14, 2013

Types of Risks for Debt Securities

Debt securities comprise of corporate bonds, certificates of deposit, debentures, government bonds and zero coupon securities, commercial papers and banknotes etc...
These are well known as Debt instruments securities.
Debt securities are safest investments tools than equity securities available in investments market.

Securities markets are two types. Namely they are 1) Primary market, 2) Secondary market.

Primary market: Investors invests money into issued bonds or other forms like shares, stocks.
Ex: IPO - initial public offering, share stock investments
Secondary market: Investors buy and sell the issued bonds or stocks etc. Other investors purchase and sale these issued bonds, papers, stocks, shares from already owned in the market.

The following different risks are accompanying with debt securities:
Unlike each investment schemes and savings plans, Debt Securities are having their own benefits and drawbacks. Before investing know the existing risks for Debt Securities bonds. 

  • Default Risk
  • Interest Rate Risk
  •  Reinvestment Rate Risk

In addition to them, there are few more kinds of risks associated with trading in debt securities
The following are the risks associated with trading in debt securities:
  • Counter Party Risk
  • Price Risk

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