In the fall of 2008, AIG, the largest insurance companyin the world at the time, was at risk of defaulting due tothe severity of the global financial crisis. As a result, theU.S. government stepped in to support AIG with largecapital injections and an ownership stake. How wouldthis affect, if at all, the yield and risk premium on AIGcorporate debt?

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Classification Of Risk

Risk means when there could be a possibility that the returns expected from a particular project or investment may or may not match the investor's expectations. In other words, the uncertainty of an income arising from a source that would either be lower than expected or result in losses in risk exposure of the project. The higher the risk involved, the higher is the return expected by the investor as the investor is exposed to a high level of risk. There are various methods by which different types of risk can be assessed and avoided or mitigated.