Interest rate risk is the risk that changes in interest rates will affect the value of an investment or the cost of financing. This risk primarily impacts bonds and other fixed-income instruments, where the value of the investment decreases as interest rates rise and increases when interest rates fall. Interest rate risk can also affect the cost of loans and mortgages, where higher interest rates may raise the cost of debt repayment. Effective management of interest rate risk involves using various financial instruments and strategies (such as derivatives) to hedge against adverse movements in interest rates.
- Financial dictionary
Interest rate risk
Interest rate risk
Related terms
| Term | Definition |
|---|---|
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