Examlex
Define the term default risk premium. Why does the "premium" represent the "expected default loss rate"? Explain how and why default risk premiums vary over the business cycle.
Market Risk
The possibility for an investor to experience losses due to factors that affect the overall performance of the financial markets.
Diversifiable Risk
The portion of investment risk that can be reduced or eliminated through diversification among different assets.
Financial Leverage
Utilizing debt to finance additional assets, aiming to increase returns to shareholders but also increasing risk.
ROE
A metric indicating how effectively a company uses shareholders' funds to generate profits.
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