Call Risk
Definition
What is Call Risk?
The risk that an issuer redeems a callable bondA bond the issuer may redeem before maturity under specified terms. when doing so disadvantages the investorA person or organisation that commits capital with the expectation of a financial return..
Example in practice
How This Looks in Practice
The bond is called after rates decline, forcing reinvestmentUsing distributions or proceeds to buy additional units instead of receiving cash. at lower yields.
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Related Terms
Market Risk
The possibility of loss because broad market prices or rates move against an investment.
Risk TermsCredit Risk
The possibility that a borrower or issuer will fail to make promised payments or suffer a downgrade.
Risk TermsInterest-Rate Risk
The possibility that changing market interest rates will reduce an investment's value or income appeal.
MiscellaneousBusiness Day
A day on which relevant financial institutions and markets are open for normal processing.