The risk of loss because a borrower or counterparty fails to meet its obligations. It covers default and deterioration in credit quality.
Where you will meet it
Credit risk comes up in 82 learning outcome notes across the FRM syllabus.
A few of them:
Banks FRM Part I · Financial markets and products
“Credit risk is the loss when a borrower or counterparty fails to pay what it owes.”
The Building Blocks of Risk Management FRM Part I · Foundations of risk management
“Credit risk is loss from a borrower or counterparty failing to pay, including a downgrade.”
External and Internal Credit Ratings FRM Part I · Valuation and risk models
“Matrices are used to build default probability term structures, to simulate migration for credit VaR and to price credit risk.”
Fundamentals of Credit Risk FRM Part II · Credit risk measurement and management
“Credit risk is the risk of loss because a counterparty fails to meet a contractual obligation in full and on time, or because its ability to do so deteriorates.”
GARP does not endorse, promote, review, or warrant the accuracy of the products or services offered by Charta Learning, nor does it endorse any pass rates claimed by Charta Learning. Further, GARP is not responsible for any fees or costs paid by the user to Charta Learning. FRM® and GARP® are registered trademarks owned by the Global Association of Risk Professionals, Inc. The questions, explanations and study notes are written for this product and are not GARP curriculum material.