What is credit risk, default risk, and spread, and how are they connected?

• A. Credit risk is the risk of default; default risk drives credit spreads—the higher the risk, the wider the spread.
• B. Credit risk is the risk of market illiquidity; default risk and spread are unrelated.
• C. Credit risk only affects equity markets.
• D. Credit risk equals currency risk; spreads are fixed.

Answer: (A)