Risk of loss due to insolvency, especially – of the issuer of a financial instrument or – due to the insolvency of the counterparty. (Often there is a confusion as to liquidity risk and solvency risk. If a company has no cash, it will be liquidity risk; but if a company is not capable to pay debt, it will be solvency risk. – Solvency risk is more dangerous risk than liquidity because, if a firm has not cash, it can borrow for paying debt. But if the liabilities exceed the assets, nobody will give a loan and the company turns into insolvency). – See counterparty risk, crash, emerging markets, information sheets for financial instruments, intercreditor agreement, liquidity risk, London procedure, manifestation, risk, risk management, solvency. – Cf. BaFin Annual Report 2002, pp. 82 ff. and the respective BaFin Annual Report.
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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