Holding period risk
Holding period risk is a financial risk that a firm's sales quote giving a potential retail client a certain time to sign the offer for a commodity, will actually be a financial disadvantage for the offering firm since the market price's on the wholesale market has changed. The risk is usually reduced by a risk premium being added onto the wholesale price of a commodity by the offering firm.
An alternative and less general definition is: Holding period risk is the risk, while holding a bond, that a better opportunity will present itself that you may be unable to act upon.[1]
Fixed-income interpretation
In fixed-income investing, holding period risk is related to the uncertainty of the return earned over the period for which a bond is actually held. A bond investor's holding-period return depends on coupon payments received, the reinvestment return on those coupons, and the price at which the bond can be sold or redeemed at the end of the holding period.[2]
This risk is affected by the relationship between the investor's holding period and the bond's interest-rate sensitivity. When a bond is sold before maturity, changes in market interest rates can affect its sale price; when coupon payments are received before the end of the holding period, the return also depends on the rate at which those payments can be reinvested.[3]
References
- ↑ "Glossary: Holding period risk". Interactive Brokers LLC. Retrieved 2015-12-14.
- ↑ "Interest Rate Risk and Return". CFA Institute. Retrieved 17 June 2026.
- ↑ "Investment Improvement: Adding Duration to the Toolbox". Federal Reserve Bank of St. Louis. April 1996. Retrieved 17 June 2026.