The Fundamental Review of the Trading Book (FRTB) recognizes two types of risk for instruments dependent on the credit risk of a particular company. These are:

1. Credit spread risk (CSR): This is the risk that the company's credit spread will change, leading to mark-to-market losses. Under FRTB, this is captured within the general market risk framework (e.g., through the Sensitivities-Based Method).
2. Jump-to-default risk: This represents the sudden default of an issuer before its credit spread has time to widen significantly. To capture this, FRTB introduced the Default Risk Charge (DRC), replacing the Basel II.5 Incremental Risk Charge (IRC) which previously captured both default and migration (downgrade) risks. Migration risk is now implicitly captured via the credit spread risk component.