Definitions for

**"reinvestment risk"****Related Terms:**Risk-free rate, Effective yield, Fixed-income securities, Income risk, Fixed-income investment, Call risk, Average maturity, Interest rate risk, Yield to maturity, Fixed income investment, Fixed-income security, Fixed income, Bond ladder, Laddering, Ytm, Fixed interest security, Redemption yield, Fixed income security, Reinvestment rate, Duration, Nominal yield, Guaranteed investment certificate, Ladder , Interest-rate risk, Fixed interest securities, Extension risk, Yield-to-maturity, Risk premium, Bond equivalent yield, Prepayment risk, Yield, Fixed-income fund, Bond funds, Barbell strategy, Risk-free rate of return, Convertible note, Term structure of interest rates, High-yield bond, Gilts, Fixed interest, Gilt, Investment risk, Fixed income securities, Junk bond, Interest, Treasury securities, Floating-rate bond, Bond ratings, Credit quality

The risk resulting from the fact that interest or dividends earned from an investment...

The risk that an investor in bonds who chooses to spend the interest, or reinvests the coupon payments, will not receive the calculated yield to maturity due to changing interest rates. Yield to maturity assumes the reinvestment (or compounding) of interest.

See interest rate risk.

The risk of a decline in earnings or capital resulting from the fact the interest and/or principal cash flows received by investors during the time that an investment is held must be reinvested at a lower than expected rate as a result of a decline in prevailing interest rates.

The risk that an investor will have to reinvest principal and interest payments at relatively lower interests rates. This may be due to falling interest rates. For example, if a Treasury note yielding 5.90% matures during a lower interest rate environment, the investor is forced reinvest the proceeds at a rate lower than the 5.90% yield.

Risk occurring given the inability to predict the interest rates at which the yield of a fixed income asset will be reinvested in the future.

When you use the money from a maturing fixed-income investment, such as a certificate of deposit (CD) or a bond, in order to make a new investment of the same type, there's no guarantee that you will earn the same rate of return on your new investment as on the one coming due. In fact, the return could be significantly lower (or higher), based on what's happening in the economy at large. This unpredictability is known as reinvestment risk. For example, if a bond paying 10% interest matures when the current rate is 5%, you must settle for a lower return if you buy a new bond or choose some other type of investment. One way to limit reinvestment risk is by using an investment technique known as laddering, which means splitting your investment among a number of bonds (or CDs) with different maturity dates. That way only part of your total investment will mature and have to be reinvested at any one time.

It is the risk that the interest on fixed income instruments cannot be reinvested at the same rate. This problem becomes pronounced in a falling interest rate scenario.

The risk that it will not be possible to obtain as high a rate of return on future cash receipts as is currently available. A risk that especially attaches to long-term bonds.

Is the situation whereby prepaid principal amounts will be reinvested in lower yielding securities.

A risk a purchaser of a bond needs to take into consideration when calculating the yield to maturity on the bond. The calculation assumes that coupon repayments are reinvested at the same rate as the yield to maturity calculated at the time of purchase. The risk is that over the life of the bond interest rates fall and the coupon payments are reinvested at less than the yield to maturity at the time of purchase. Reinvestment risk is one of several types of risk associated with bonds. Others are interest rate risk, credit risk, call risk, inflation risk, currency risk, and event risk.

The uncertainty around reinvestment rates at a future date. An example is the inability of a bondholder to reinvest his coupons at a higher or equivalent coupon rate when the bond matures.

is the risk that an investor will be forced to reinvest cash flow from an issue at substantially lower rates that the yield of the original investment. Risk can be either systematic or unsystematic (diversifiable).

the risk that an asset manager will be unable to match the yield from an interest-rate instrument (such as a swap or bond) when reinvesting its coupon payments and principal repayments.

The risk that a fixed-income investor will be unable to reinvest income proceeds from a security holding at the same rate of return currently generated by the holding

The risk that interest income or principal repayments will have to be reinvested at lower rates.

The risk that an investor in bonds who chooses to spend the interest, or is unable to reinvest the coupon payments, will not receive the calculated yield to maturity. Yield to maturity assumes the reinvestment (or compounding) of interest.

Risk from uncertainty as to the interest rate at which future cash flows may be invested.

The prospect that securities will not be able to pay higher rates of interest when general interest rates rise or retain previous levels of interest when general interest rates fall.

The risk that proceeds received in the future will have to be reinvested at a lower potential interest rate.

The threat that future interest rates at which coupons can be reinvested will be lower than the yield to maturity at the time the bond is acquired. See also: Risk.

The risk that the income from an investment will be reinvested at a lower rate than achieved on the original investment. This is common when interest rates fall.

Reinvestment risk is one of the main genres of financial risk. The term describes the risk that a particular investment might be canceled or stopped somehow, that one may have to find a new place to invest that money with the risk being there might not be a similarly attractive investment available. This primarily occurs if bonds (which are portions of loans to entities) are paid back earlier then expected.

reversal arbitrage Random walk