O'Reilly logo

Debt Markets and Analysis, + Website by R. Stafford Johnson

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

CHAPTER 5

Bond Risk

Introduction

Investment risk is the possibility that the actual rate of return realized from an investment will differ from the expected rate. For bond investors, there are three types of risk: (1) default risk: the possibility that the issuer/borrower will fail to meet the contractual obligations specified in the indenture; (2) call risk: the possibility that the issuer/borrower will buy back the bond, forcing the investor to reinvest in a market with lower interest rates; and (3) interest rate risk or bond market risk: the possibility that interest rates will change, changing the price of the bond and the return earned from reinvesting coupons. In this chapter, we examine these three types of risks and introduce two measures ...

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required