What is rating migration risk in fixed-income securities?
A
The risk of interest rates changing
B
The risk of the issuer being unable to repay the principal amount
C
The risk that the price may be affected by a change in the credit rating
D
The risk of the security's duration increasing
Correct Option:
C
Explanation
Rating migration risk is the risk that a change in the credit rating of a debt security may affect its market price and yield. A downgrade typically reduces the security's price and increases its perceived credit risk, while an upgrade may have the opposite effect.
