- Concentration risk
If one has a large exposure to a particular script, sector, or a commodity, etc.. this results into concentration risk. If the price of that particular stock or commodity changes adversely; it will impact the entire organisation or the entire portfolio.
It won’t be incorrect to say that ‘lack of diversification may lead to concentration risk’
- Credit spread risk
Credit spread risk refers to the yield-difference between the yield of two securities of same asset class but of different credit standing.
Example: Mr. A invests in Government bond at a yield of 8% p.a.
Whereas Ms. B invests in Corporate bond with a yield of 10.75% p.a.
It clearly reflects the extra compensation paid to the Corporate bond holder for having the appetite to take the extra credit risk inherent in Corporate Bond as compared to the Government bond.