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Interest rate risk is the risk that arises for bond owners from fluctuating interest rates. How much interest rate risk a bond has depends on how sensitive its price is to interest rate changes in the market. The sensitivity depends on two things, the bond's time to maturity, and the coupon rate of the bond. [1]
Interest rate risk, maturity risk and inflation risk are among the ways in which bonds can be devalued over time. Bond investors who want to reduce their risk level may consider strategies such as ...
Interest Rate Risk: Interest rate risk is the most significant of all the risks associated with asset and liability management. Interest rate risk is the unexpected change in interest rates as you ...
Asset-liability Management: Issues and trends, R. Vaidyanathan, ASCI Journal of Management 29(1). 39-48; Price Waterhouse Coopers Status of balance sheet management practices among international banks 2009; Bank for International Settlements Principles for the management and supervision of interest rate risk - final document
Financial risk management is the practice of protecting economic value in a firm by managing exposure to financial risk ... Interest rate- and credit risk together, ...
Reinvestment rate risk is the chance that an investment will produce lower than expected income due to a future drop in interest rates. This risk is most closely associated with fixed-income ...
The interest sensitivity gap was one of the first techniques used in asset liability management to manage interest rate risk. [1] The use of this technique was initiated in the middle 1970s in the United States when rising interest rates in 1975-1976 and again from 1979 onward triggered a banking crisis that later resulted in more than $1 trillion in losses when the Federal Deposit Insurance ...
The term is typically used by banks, pension funds, or other financial institutions to measure, and manage, their risk due to changes in the interest rate: by duration matching, that is creating a "zero duration gap", the firm becomes immunized against interest rate risk. See Financial risk management § Investment management. [1] [2]