A claim's rank in the order of repayment if the borrower fails. Senior debt is repaid before subordinated debt.
Where you will meet it
Seniority comes up in 15 learning outcome notes across the FRM syllabus.
A few of them:
Corporate Bonds FRM Part I · Financial markets and products
“Collateral determines security and seniority.”
The Governance of Risk Management FRM Part I · Foundations of risk management
“Risk functions were siloed, chief risk officers lacked seniority and independence, and boards had little risk expertise.”
External and Internal Credit Ratings FRM Part I · Valuation and risk models
“It depends on seniority, collateral and the state of the economy, and it is often estimated from the bond price a month or so after default.”
Governance FRM Part II · Credit risk measurement and management
“The rest are pricing in the form of margin and fees, collateral and guarantees, the seniority or ranking of the claim, and covenants and other terms such as currency.”
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.