Ans: Dynamic bond funds are subject to the credit risk on debt assets. Credit risk is the possibility of a loss on a debt due to the borrower’s failure to repay. Dynamic bonds that primarily invest in government/PSU bonds and securities have no credit risk. There is a guarantee that the credit will be repaid after the maturity of the securities.  On the other hand, dynamic bond funds with most allocations in corporate bonds and money market instruments have a higher credit risk.