The document discusses various financial risks associated with investments in debt instruments and swaps. It highlights the risks of default, interest rate sensitivity, and liquidity issues related to lower-rated bonds, also known as junk bonds. The document explains how interest rate changes can affect the value of debt securities, with longer-duration securities being more sensitive to rate increases. It also covers extension and prepayment risks, which can impact the yield and total return of a fund. Additionally, the document addresses the use of swaps in investment strategies, noting the potential for counterparty default and market illiquidity during times of turmoil.
documents/EFTA01390697.pdf
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