Groundlearn / Glossary / Reinvestment risk
Reinvestment risk
A CFA term, defined in plain English with the distinction examiners test.
What it means
The risk that coupons and principal must be reinvested at a lower rate than expected.
The exam angle
Moves opposite to price risk. Setting a horizon equal to Macaulay duration is what makes the two offset — the basis of immunisation.
Where it appears in the syllabus
- Fixed IncomeCFA Level I · exam weight 11–14% · Pricing, yield measures, duration, convexity, credit spreads.
- Asset AllocationCFA Level III · exam weight 15–20% · Capital market expectations, allocation principles, real-world constraints.
Related terms
- Callable bondA bond the issuer may redeem early, usually when rates have fallen.
- ConvexityThe curvature of the price–yield relationship — how duration itself changes as yields move.
- Coupon rateThe annual interest a bond pays, as a percentage of par.
- Credit spreadThe extra yield a borrower pays over a risk-free benchmark of the same maturity, compensating for default and…
- Current yieldA bond’s annual coupon divided by its current market price — the cash income it throws off this year per unit invested.
- DurationThe sensitivity of a bond’s price to a change in yield, and equivalently the weighted average time to receiving its…
Educational content only. This is not financial, investment, legal or regulatory advice. Check the official curriculum for your own exam before relying on any definition here.
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