Definition of Cross default

Cross default

A provision under which default on one debt obligation triggers default on another debt
obligation.

Average (across-day) measures

An estimation of price that uses the average or representative price of a
large number of trades.

Cross hedging

The practice of hedging with a futures contract that is different from the underlying being
hedged.

Cross holdings

One corporation holds shares in another firm.

Cross rates

The exchange rate between two currencies expressed as the ratio of two foreign exchange rates
that are both expressed in terms of a third currency.

Cross-border risk

Refers to the volatility of returns on international investments caused by events associated
with a particular country as opposed to events associated solely with a particular economic or financial agent.

Cross-sectional approach

A statistical methodology applied to a set of firms at a particular point in time.

Crossover rate

The return at which two alternative projects have the same net present value.

Default

Failure to make timely payment of interest or principal on a debt security or to otherwise comply
with the provisions of a bond indenture.

Default premium

A differential in promised yield that compensates the investor for the risk inherent in
purchasing a corporate bond that entails some risk of default.

Default risk

Also referred to as credit risk (as gauged by commercial rating companies), the risk that an
issuer of a bond may be unable to make timely principal and interest payments.

Events of default

Contractually specified events that allow lenders to demand immediate repayment of a debt.

Default

The failure by a debtor to make a principal or interest payment in a timely
manner.

default premium

Difference in promised yields between a default-free bond and a riskier bond.

Default

Failure of a debtor to make timely payments of principal and interest as they become due.

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