Reinvestment risk is the possibility that the cash flows generated from an investment will yield less of a return when used in new investments.
Callable bonds are particularly vulnerable to reinvestment risk because these bonds typically redeem at lower interest rates.
Reinvestment risk mitigation techniques include the use of non-callable bonds, zero-coupon instruments, long-term securities, bond ladders, and actively managed bond funds.
Risk acceptance or risk containment is a conscious strategy of recognizing the possibility of small or rare risks without taking measures to hedge, hedge or avoid these risks.
Audit risk is the risk that the financial statements will be materially incorrect, even if the auditor’s report indicates that the financial statements do not contain any material misstatement.
Counterparty risk is the likelihood or likelihood that one of the parties to a transaction may fail to meet its contractual obligations. Counterparty risk may exist in lending, investment and trading transactions.
Immunization is a risk mitigation strategy that equalizes the duration of assets and liabilities so that the value of the portfolio is protected from changes in interest rates.
Risk takes many forms, but is generally classified as the possibility that the outcome or actual return on an investment will differ from the expected outcome or return.
Risk control is a set of methods by which firms evaluate potential losses and take actions to reduce or eliminate such threats. This is a method that uses the results of a risk assessment.
The risk parity approach to portfolio building aims to allocate investment capital on a risk-weighted basis for optimal investment diversification by considering the risk and return of the entire portfolio as a whole.