What is the difference between these two? To me they are one and the same. Market risk is just fluctuation of the value/price of the securities you hold. Credit risk is defined clasically as the chance that you won’t get all your money back. To me the latter simply means that your yield will be different to what you can get in the market.
I kind of see that the prevailing interest rate is effectively the generator of market risk for fixed income securities and then credit risk is effectively another layer of risk.
Market risk is the risk that the value of a bond will decline even when the issuer makes timely payments.
Credit risk is the risk that the issuer won’t make timely payments.
Market risk is the risk that cannot be diversified, it is measured in equity valuations in its beta. It is inherent to all financial securities, while credit risk is the risk of a loss due to untimely payments or full payments.
Thanks. I think the thing that was messing me up was the idea that risks can be related like wrong-way risk for example.