Creditors typically want a higher interest rate to compensate for
bearing higher default risk.
Not exact matches
The purpose of the arrangement is to pass the risk of specific
default onto investors willing to
bear that risk in return for the
higher yield it makes available.
Bear ran with
high leverage that made them vulnerable to attacks from those that bought credit protection in the credit
default swap market... as those spreads went up, the willingness to extend credit went down.
The credit cycle tends to be like this: in the bull phase, a long period (4 - 7 years) with few
defaults and low loss severity followed by a
bear phase, a shorter period (1 - 3 years) with
high defaults and
high loss severity.