<P> Credit risk, also called default risk, is the risk associated with a borrower going into default (not making payments as promised). Investor losses include lost principal and interest, decreased cash flow, and increased collection costs . An investor can also assume credit risk through direct or indirect use of leverage . For example, an investor may purchase an investment using margin . Or an investment may directly or indirectly use or rely on repo, forward commitment, or derivative instruments . </P> <P> Foreign investment risk is the risk of rapid and extreme changes in value due to: smaller markets; differing accounting, reporting, or auditing standards; nationalization, expropriation or confiscatory taxation; economic conflict; or political or diplomatic changes . Valuation, liquidity, and regulatory issues may also add to foreign investment risk . </P> <P> This is the risk that a given security or asset cannot be traded quickly enough in the market to prevent a loss (or make the required profit). There are two types of liquidity risk: </P> <Ul> <Li> Asset liquidity--An asset cannot be sold due to lack of liquidity in the market--essentially a sub-set of market risk . This can be accounted for by: <Ul> <Li> Widening bid - offer spread </Li> <Li> Making explicit liquidity reserves </Li> <Li> Lengthening holding period for VaR calculations </Li> </Ul> </Li> <Li> Funding liquidity--Risk that liabilities: <Ul> <Li> Cannot be met when they fall due </Li> <Li> Can only be met at an uneconomic price </Li> <Li> Can be name - specific or systemic </Li> </Ul> </Li> </Ul>

Which of the following is not a form of financial risk ​