call risk

Call risk

The combination of cash flow uncertainty and reinvestment risk introduced by a call provision.

Call Risk

A risk that a callable bond will be repaid early and that the money earned may not be able to be reinvested in a security with a comparable return. Suppose one invests in a callable bond with coupon payments of 4%. However, interest rates fall and the issuer calls the bond and pays the par value. The investor may make a profit, but now he/she may only purchase a bond with a coupon of 2.5%. Most callable bonds include call periods in the indenture, protecting the bondholder from this risk for a certain period of time. Call risk is one of the most common kinds of reinvestment risk.

call risk

References in periodicals archive ?
Loans can carry significant credit and call risk, can be difficult to value and have longer settlement times than other investments, which can make loans relatively illiquid at times.
Tenders are invited for Construction of Aadarsh Eklavya Awasiya Vidhyalaya at UKWA Balaghat Distt Balaghat M P Including Internal Electrification and Development Works First Call Risk and Cost Against Agreement No 08 DL of 2012 13
Basically, this new method, which we call risk accounting, adapts the management accounting system so that the information typically attached to a transaction when it's registered in a bank's system (product, customer, market segment etc) is complemented by information on risk that's triggered when the transaction is accepted.
Developing a functional portfolio that complements your core business entails looking at duration risk, call risk, liquidity risk extension risk just to name a few basic metrics.
I regard myself as part of a movement we call risk literacy.
Often, when I have discovered them struggling with risk mitigation, I have asked, "Why didn't you call risk management?
Risk management is fundamental to our business, so our entire executive staff address many of the items that you would call risk management as key areas of focus," Sandhu says.
In particular, they are designed to protect against call risk for 1 0 years or so and to return principal in a way that can be predicted.
The Fund also is subject to prepayment and call risk and extension risk to varying degrees.
For more information, please call Risk Transfer at the following telephone line or visit www.
To mitigate call risk, investors can either avoid bonds with call provisions or buy those unlikely to be called--those with a stated interest rate considerably below the current market rate.
Other risks, including inflation risk, call risk, and pre-payment risk, also apply.