This is the risk which arises when there is a probability that ones borrowers will not be in a position to meet their commitment of paying interest and/or principal.

Debt instruments are subject to this risk as they have pre-committed pay outs. The ability of the issuer of the debt instrument to service the debt may change over time and this creates default risk for the investor.

One cannot sell an investment when one desires and at the price one desires, is the risk of liquidity.

Liquidity risk is the risk that an investment cannot be easily sold when desired, or it has to be sold below its intrinsic value, or there are high costs to carrying out transactions. All of this affects the realizable value of the investment.

The risk that one would not be in a position to get the same rate of interest upon the periodic revision of the rates.

Re-investment risk is the risk that the periodic cash flows received from an investment may not be able to earn the same interest as the original interest rate. If these cash flows are reinvested at lower rates then the total return from the investment will come down and vice versa.

Business risk is the risk inherent in the operations of a company.

This is caused by factors such as cost of raw materials, employee costs, introduction and position of competing products, marketing and distribution costs. The effect of these factors on the financial performance of the company may affect its ability to meet its obligations on the debt raised by it. It will also reflect on the share prices in the stock markets. Business risks are specific to a company or industry.

Interest rate risk refers to the risk that bond prices will fall in response to rising interest rates, and rise in response to declining interest rates. Bond prices and interest rates have an inverse relationship. In other words, an increase in interest rates in the market will lead to a decline in the prices of existing bonds and vice versa. This risk also extends to debt funds, which primarily hold debt assets.

Market risk refers to the risk of the loss of value in an investment because of adverse price movements in an asset in the market. Market risk affects those investments where transactions happen at current applicable prices, such as equity, bonds, gold, real estate, among others.