What is Interest Rate Risk?
Interest Rate Risk The risk that changes in interest rates will negatively affect the value of bonds or other fixed-income securities in a portfolio. Measured using duration, convexity, and scenario analysis.
Source: CFA Institute, IFRS Foundation, FASB (GAAP), Basel III Framework
How is “Interest Rate Risk” Used in Practice?
Rising rates increased interest rate risk, causing the value of the portfolio's long-duration bonds to decline sharply.
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Who Needs to Know This Term?
- Financial Analysts
- Bankers
- Traders
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What is Interest Rate Risk?
The risk that changes in interest rates will negatively affect the value of bonds or other fixed-income securities in a portfolio. Measured using duration, convexity, and scenario analysis.
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