Debt risk assessment: Are you on the right path?

Equities are generally considered much riskier than bonds. Yet measuring and assessing the risks of bonds may very well be a more difficult task. A preferred research program into fixed income assessment is based on the building block approach to financial security pricing analysis. That is, one works with six basic building blocks, which are additive. They are: long or short a futures position, long or short a call option, or long or short a put option. The vast majority of securities can be reasonably defined for risk assessment purposes using these six positions, separately or in combination, to measure the risk of the specific security in question.