The risk that an issuer may redeem a security sooner than expected.
The possibility that falling interest rates will cause a bond issuer to redeem-or call-its high-yielding bond before the bond's maturity date.
Risk to the investor associated with prepayments by the issuer of the principal amount of the bonds prior to the stated maturity date, in accordance with the bonds' redemption provisions.
The cash flow risk resulting from the possibility that a callable bond will be redeemed before maturity.
A form of investment risk when a bond may be called, or redeemed prior to maturity, and that the investor will be unable to reinvest the principle for the same or a higher rate of return. This risk increases when interest rates are falling and it becomes more attractive for the bond issuer to call their bonds with the higher interest rates and issue new bonds with a lower interest rate. Most bonds that do have a call provision have some protection for a specified number of years.
For a CMO, the risk that declining interest rates may accelerate mortgage loan prepayment speeds, causing an investor's principal to be returned sooner than expected. As a consequence, investors may have to reinvest their principal at a lower rate of interest. Callable Bond: A bond which the issuer has the right to redeem prior to its maturity date, under certain conditions.
The possibility that pre-payments will increase above an anticipated rate, causing earlier-than-expected return of principal, usually during a time of falling interest rates.
is the risk that during periods of declining interest rates, an issuer of a bond may "call" (i.e., redeem) a high-yielding obligation before its maturity date. This often creates an unanticipated capital gain liability for shareholders and requires the fund to reinvest the proceeds at the lower prevailing interest rate.
Call risk refers to the risk that a bond may be called when the investor does not want it to be called. Bond are often called when interest rates decline, so investors in the bond get their cash back and have to reinvest it at the lower rates. Call risk can be eliminated by buying non-callable bonds.
The risk that a bond will be called prior to its maturity date, causing the bond's principal to be returned sooner than expected. If the bondholder wishes to reinvest the principal, it usually must be done at a lower rate than when the bond was originally purchased. Also called default risk.
The possibility that bonds will be re-paid (or "called") prior to maturity. This possibility increases during periods of falling interest rates.
The combination of cash flow uncertainty and reinvestment risk introduced by a call provision.
The risk to a bondholder that the bond may be redeemed prior to maturity.
The threat that a bond may be retired or paid off by the issuer. As interest rates drop, a bondholder may see the value of his/her investment drop toward the call price and, if the bond is called, he/she could be forced to reinvest the funds at a lower interest rate.
A bondholder's risk that the bond may be redeemed prior to maturity. See: Call; Callable; Maturity Date; Redemption; Risk