Study your flashcards anywhere!

Download the official Cram app for free >

  • Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off

How to study your flashcards.

Right/Left arrow keys: Navigate between flashcards.right arrow keyleft arrow key

Up/Down arrow keys: Flip the card between the front and back.down keyup key

H key: Show hint (3rd side).h key

A key: Read text to speech.a key


Play button


Play button




Click to flip

8 Cards in this Set

  • Front
  • Back
market risk (interest-rate risk)
ifor an investor who sell fixed income security before the maturity date, increase in interest rate will result in realization of a capital loss.
percentage change in the price of a bond due to 100 basis point change in yields.
reinvestment risk
variability in the returns from reinvestment from a given strategy due to change in market rate.
interest rate risk vs. reinvestment risk
interest rate risk = risk that interest rates will rise.

reinvestment risk = risk that interest rate will fall.
timing or call risk
risk associated with call provision:
1. cash flow pattern is not known
2. exposed to reinvestment risk
3. capital appreciation potential will be reduced.
credit risk (default risk)
risk that the issuer of a fixed income security may default.
yield curve (maturity risk)
adjustment made to account for differential interest-rate risks in the two hedged bonds.
liquidity risk
risk that investor will have to sell a bond below its true value where true value is indicated by a recent transaction.