Investing term

What is Default?

When a borrower fails to make a scheduled payment on a debt — a missed coupon, or failure to return principal at maturity.

Default is when a borrower fails to make a payment it owes — a missed bond coupon, or failing to return the principal at maturity. For a bondholder it's the core risk: a defaulting issuer may pay late, pay partially, or not at all. Higher-yielding bonds pay more precisely because their default risk is greater.

For example

A struggling company skips the coupon payment on its bonds — that default can wipe out much of what lenders expected to be repaid.

Default is taught hands-on in Stage 19 — Beyond Stocks.

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Related terms

ASMLDutch semiconductor-equipment company that makes the EUV lithography machines every advanced chip is manufactured on — a global monopoly with no US peer.Bond ladderA portfolio of bonds with staggered maturities — one matures every year (or every few years) so cash continuously becomes available.CryptocurrencyDigital assets recorded on a blockchain — Bitcoin, Ethereum, etc. Highly volatile and not backed by cash flows or governments.Currency hedgingAn overlay used by some international ETFs to remove the effect of currency moves, so you get the foreign stock return in your home currency.
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