Reinvestment risk

That assumed by the holder of a fixed income security, as a result of the effect that the evolution of interest rates may have on reinvesting the flows derived from the investment. It occurs due to the cash flows generated, and also due to the repayment of the principal or the market price of the asset, in the event that the length of the investment does not coincide with its maturity date. Changes in interest rates will produce a greater or lesser return on the reinvestment of cash flows, compared with the one initially planned; On the other hand, upon maturity of the asset, if capital is reinvested, the interest rates will determine a greater or lesser return on the investment in the last period. There is no reinvestment risk in zero coupon bonds because a single flow is received at maturity.