interest rate risk

Definition

The possibility of a reduction in the value of a security, especially a bond, resulting from a rise in interest rates. This risk can be reduced by diversifying the durations of the fixed-income investments that are held at a given time.

Use interest rate risk in a sentence

You need to make sure that you understand what the interest rate risk will be before you decide to pursue.

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There was an interest rate risk and I did not want to go an further with the possibility of something going bad.

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The interest rate risk was exceedingly high as the federal reserve has been recently keen on adjusting the interest rates regularly.

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prepayment risk zero-gap condition