Interest Rate Risk: This is the risk of bond prices coming down due to increase in interest rates in the economy due to macro factors and regulatory policy. Bond prices tend to appreciate in a declining interest rate scenario and depreciate in a rising interest rate scenario.


Credit Risk: This is the risk of the issuing entity defaulting on the payment due on the instrument or bond yield widening as a result of deterioration in their credit profile.


Liquidity Risk: Risk that there might not be buyers or sellers in the market for a bond.
Typically, higher the rating of the instrument, higher the liquidity of the instrument. Bonds listed on a recognised stock exchange are usually more liquid than unlisted bonds.

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