 Generally, government bonds are considered as risk-free financial instruments, but on other hand, the carpet bonds are not considered as free from the risk of default. Although, the carpet bonds carry a fixed income stream throughout their lives, but the payment of coupons on these carpet bonds may not be guaranteed as these payments are subject to the financial health of the issuers in the days to come. By bond default risk means credit risk because bonds are in fact credit extended by the bond holder to the issuer. By bond rating, we mean the rating that reflects the assessment of the safety of the bond issue. To have bond rated, there are certain rating companies that provide financial information on firm as well as the quality rating of long-term carpet and municipal bonds issues. There are certain categories that are assigned to certain bonds according to their financial characteristics and these are ranging from highest rating that is, for example, triple A. And for investment grade bonds, these are rated at above triple B. For speculative are junk bonds, these are rated at below triple B or BBB, determinants of bond safety, how the amount collected through bond can be safely repaid to the bond holders. Certain parameters are there. First is the coverage ratios. These are the ratios of companies earning to the fixed cost borne by the company in the form of interest payments. Leverage ratios, these ratios measure the level of firms in-depthness. Liquidity ratios, these measure the firm's ability to pay its bills coming due with its most liquid assets. These ratios measure the rate of return on the assets or equity earned by the firm. Cash flow to debt ratio, these are the ratios of cash flow to the outstanding debt of the company at any point in time. Ration and default risk prediction, there is a model that is known as Z score that is used to predict the likelihood of a situation where a firm can go into insolvency. That Z score has been developed by Edward Altman and it is also known as Altman's Z score. This Z score uses discriminant analysis to predict firms bankrupt seem. This Z score analysis determines an equation of the line that best separates the observations of firms into the firms that are solvent and that might be going into insolvency during the period in the days to come. A firm is assigned a score based on its financial characteristics. A firm with score above the cut-off rate is considered as a safer firm, whereas a low score lower than the cut-off rate indicates significant default risk in the near future. The Altman's equation to separate failing and non-failing firm is a regression equation that carries certain variables and there are five variables in this equation. These variables basically are the five different ratios. These ratios account for liquidity, these ratios account for turnover, these ratios account for profitability, these ratios account for solvency of the firm and they are certain coefficients allotted to each variable and these coefficients are basically the weight of that particular variable in the whole equation. The interpretation of Z score is that a score below 1.23 shows that the firm is vulnerable to insolvency in the coming period. If the score is below, if the score is between 1.23 to 2.90, so between these two boundaries, the firm is considered as the gray area firm and if the score is above 2.9, the firm is considered as a safer firm. Now how the measures are available with the company as protection against the risk of default. The first measure is the establishment of a sinking fund. Through the establishment of a sinking fund, the bond can be called or repaid very easily in the time of maturity. The subordination of future debt restricts the firm from additional borrowing. Dividend restrictions can be levied on the issuer which force to the firm to retain assets rather than paying them out to the shareholders. Collateral, a particular asset that bond holders receive if the firm defaults here, it is point to be noted that while issuing a bond, the debt may be secured or it may be unsecured. For default risk and yields, we can say that the carpet bonds are subject to default risk due to certain factors that may have significant influence on the financial health of the firm in the days to come till the maturity of the bonds. Realization of promised yield is subject to the firm's if the firm is meeting obligation on the bonds issue. So this depends that how a firm is meeting its liabilities. Expected yield to maturity must consider the possibility of a riskiness of the default. If there are more chances on default on a bond then the price of the bond will fall. The promised yield of yield to maturity on the bond will also fall and the expected yield to maturity which is tied to the bond systematic risk will be far less affected. Now finally in the last, what are the credit default swaps or the CDS? In fact, a CDS or the credit default swap is an insurance policy on default risk of a bond issued by any carpet firm. In CDS, the buyer pays annual premium against the bond's default risk. The issuer agrees to buy the bonds in the case of default or pay the difference between the par value and the market value to the CDS holder. The risk structure of interest rate and CDS prices must be tightly aligned. Institutional bond holders use CDS and these are the primary market of the CDS. These institutional bonds use CDS to enhance credit worthiness of their loan portfolios to manufacture triple A or high rated debt.