A type of risk that is associated with a financial product that is offered or made but may not be desired (i.e., in demand) on the current secondary markets. Even if such an undesired product can be sold, sale will be effected at a heavy discount to its value. An example is a mortgage loan that is originated but prior to close it turns out that investors are not interested in holding it (i.e., providing lending in return for certain interest rate).
For a credit-linked financial product, product risk includes all of the inherent features of the product, such as borrower credit score, certain financial ratios (LTV and debt-to-income ratio, extent of credit risk layering (i.e., adding up multiple product risk factors).
