Examples of default in the following topics:
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- Partnerships have certain default characteristics relating to both the relationship between the individual partners and the relationship between the partnership and the outside world.
- For example, if a partnership defaults on a payment to a creditor, the partners' personal assets are subject to attachment and liquidation to pay the creditor.
- By default, profits are shared equally among the partners.
- By default, a partnership will terminate upon the death, disability, or even withdrawal of any one partner.
- By default, each general partner has an equal right to participate in the management and control of the business.
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- It is an evaluation made by a credit rating agency of the debtor's ability to pay back the debt and the likelihood of default.
- A poor credit rating indicates a credit rating agency's opinion that the company or government has a high risk of defaulting, based on the agency's analysis of the entity's history and analysis of long term economic prospects.
- Results focus foremost on economics, specifically sovereign default risk and/or payment default risk for exporters (a.k.a. trade credit risk).
- A short-term rating is a probability factor of an individual going into default within a year.
- It is used by many mortgage lenders that use a risk-based system to determine the possibility that the borrower may default on financial obligations to the mortgage lender.
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- This is because the debt and interest are highly unlikely to be defaulted.
- A good example of such risk-free interest is a US Treasury security - it yields the minimum return available in economics, but investors have the comfort of the (almost) certain expectation that the US Treasury will not default on its debt.
- A risk-free rate is also commonly used in setting floating interest rates, which are usually calculated as the risk-free interest rate plus a bonus to the creditor based on the creditworthiness of the debtor (in other words, the risk of him or her defaulting and the creditor losing the debt).
- In reality, no lending is truly risk free, but borrowers at this rate are considered the least likely to default.
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- The purest form is the credit default swap market, which is essentially a traded market in credit insurance.
- A credit default swap represents the price at which two parties exchange this risk – the protection "seller" takes the risk of default of the credit in return for a payment, commonly denoted in basis points (one basis point is 1/100 of a percent) of the notional amount to be referenced, while the protection "buyer" pays this premium and in the case of default of the underlying (a loan, bond or other receivable), delivers this receivable to the protection seller and receives from the seller the par amount (that is, is made whole)
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- The debt is thus secured against the collateral, and in the event that the borrower defaults, the creditor takes possession of the collateral asset and may sell it in order to recover some or all of the amount loaned.
- In the event of a default, the higher one's position in the company's capital structure, the stronger one's claims to the company's assets.
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- In some cases universal default may apply - the high default rate is applied to a card in good standing by missing a payment on an unrelated account from the same provider.
- For merchants, a credit card transaction is often more secure than other forms of payment, because the issuing bank commits to pay the merchant the moment the transaction is authorized regardless of whether the consumer defaults on the credit card payment.
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- A foreclosure is a legal process in which mortgaged property is sold to pay the debt of the defaulting borrower.
- If the borrower defaults on the loan, the bank has the legal right to repossess the house and sell it, to recover sums owed to it.
- Interest rates on unsecured loans are nearly always higher than for secured loans, because an unsecured lender's options for recourse against the borrower in the event of default are severely limited.
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- In the event that the borrower defaults, the creditor takes possession of the asset used as collateral and may sell it to regain some or all of the amount originally lent to the borrower.
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- This represents a default version of a partnership, which governs the relationships between the individual partners as well as between the partnership and the outside world.
- In terms of risks and returns (or liabilities and profits), the default assumption is that profits are distributed equally, and that liability is shared jointly and severally.