Prepayment risk:

Reinvestment risk generally arises in context of financial contracts involving more than one cash flow. The yield on such securities will be influenced by the reinvestment opportunities available for cash flows accruing before the maturity of the contract.

Thus investment in coupon bonds would involve some degree of reinvestment risk. Zero coupon bonds and single payment loans; on the other hand involve no reinvestment risk. The nature of reinvestment risk is such that risk associated with market value is negatively correlated with risk associated with reinvestment. Finally, we may mention prepayment risk, which may   arise in those borrowings where the borrower has the option of repaying the loan before the maturity period. In the context of bonds, this is generally referred to as the option to call the bond. What makes prepayment risk problematic for an  investor in either mortgages (housing loans) or bonds is that prepayments tend to increase when interest rates are declining.