Repudiation

AAA

DEFINITION of 'Repudiation'

Disputing the validity of a contract and refusing to honor its terms. In investing, repudiation is most relevant in fixed income securities, particularly sovereign debt. Fixed income instruments are fundamentally contracts where the borrower lends a certain amount of principal in return for payments of interest and principal on a preset schedule. Repudiation occurs if the borrower refuses to honor this contract and stops making the agreed upon payments.

INVESTOPEDIA EXPLAINS 'Repudiation'

With fixed income instruments it is always possible that the borrower may default, dispute the validity of the contract or otherwise refuse to pay. If the borrower does repudiate the contract, the corresponding investors may lose their entire investment unless they are able to take recourse against the borrower. In the case of sovereign debt, however, there is often not any method of recourse against the borrowing nation.

RELATED TERMS
  1. Debt

    An amount of money borrowed by one party from another. Many corporations/individuals ...
  2. Loan Loss Provision

    An expense set aside as an allowance for bad loans (customer ...
  3. Loan Commitment

    A loan amount that may be drawn down, or is due to be contractually ...
  4. Unsecured Loan

    A loan that is issued and supported only by the borrower's creditworthiness, ...
  5. European Sovereign Debt Crisis

    A period of time in which several European countries faced the ...
  6. Budget Deficit

    A status of financial health in which expenditures exceed revenue. ...
RELATED FAQS
  1. Who bears the risk of bad debts in securitization?

    Bad debts arise when borrowers default on their loans. This is one of the primary risks associated with securitized assets, ... Read Full Answer >>
  2. How will a value added tax impact the government budget?

    In 1992, the Congressional Budget Office conducted an economic study on value-added tax, or VAT. At the time, the CBO concluded ... Read Full Answer >>
  3. How do I evaluate a debt security?

    Debt securities are a form of loan from an investor to the government or a business. Among the many different types of debt ... Read Full Answer >>
  4. What austerity measures can a country implement to curtail government spending?

    Broadly speaking, there are three types of austerity measures. The first is focused on revenue generation (higher taxes), ... Read Full Answer >>
  5. What are some historic examples of hyperinflation?

    Hyperinflation is an extreme case of monetary devaluation that is so rapid and out of control that the normal concepts of ... Read Full Answer >>
  6. What are some historical examples of debt securitization?

    The first debt securities were probably sovereign debt assets that were transferred from the British government to mercantilist ... Read Full Answer >>
Related Articles
  1. Insurance

    Credit Default Swaps: What Happens In A Credit Event?

    The credit crisis of 2008 prompted important changes to the settlement of credit default swaps.
  2. Entrepreneurship

    Small Business: Speed Up Receivables To Avoid A Cash Crunch

    Waiting for customers to pay can be a losing game. Look to factoring for quicker cash.
  3. Retirement

    The Best Way To Borrow

    There are many avenues from which to drum up funding. Find out the pros and cons of each.
  4. Economics

    Top 4 Ways to Invest in Chinese Bonds

    Investing in Chinese bonds isn't easy, but it is possible. Here's how.
  5. Economics

    Game Theory And The Greece Bank Crisis

    How can game theory help us understand how the Greece bank crisis will play out? As things come to a head, Greece and the Europeans are trying to hold out.
  6. Stock Analysis

    Top 5 Emerging Market Bond ETFs

    The high growth potential of emerging markets makes these five ETFs popular among risk-tolerant investors.
  7. Investing News

    Greece or China: Which is the Bigger Worry?

    A look at Greece, China and other economic concerns, as well as how to invest given the current environment.
  8. Economics

    Investing in Greece: A High Risk, High Reward Strategy

    The Pros and Cons of Investing in the Troubled Greek Economy.
  9. Economics

    What Should Everyone Know About Greece’s Debt

    We weigh in on the top four things everyone should know about Greece's debt.
  10. Economics

    Understanding the Downfall of Greece's Economy

    Greece has defaulted on its debt. Such an unprecedented event has left many wondering how Greece’s situation ever got so messy.

You May Also Like

Hot Definitions
  1. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  2. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  3. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  4. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  5. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  6. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!