Interest rate risk: Difference between revisions

From ACT Wiki
Jump to navigationJump to search
imported>Doug Williamson
(Add links.)
imported>Doug Williamson
(Differentiate from internal rate of return.)
Line 1: Line 1:
(IRR).
The risk associated with a change in interest rates.  
The risk associated with a change in interest rates.  


Line 14: Line 16:


Sometimes written 'interest-rate risk'.
Sometimes written 'interest-rate risk'.
Not to be confused with Internal Rate of Return, which is also abbreviated to ''IRR''.




Line 25: Line 29:
* [[Forward rate agreement]]
* [[Forward rate agreement]]
* [[Guide to risk management]]
* [[Guide to risk management]]
* [[Internal rate of return]]
* [[Interest cover]]
* [[Interest cover]]
* [[Interest rate]]
* [[Interest rate]]

Revision as of 08:15, 24 June 2022

(IRR).

The risk associated with a change in interest rates.


This may take several forms in the treasury context.

For example, and depending on the direction of the change:

  • Increasing interest cost
  • Falling interest income
  • Changing market value of debt, or of pension liabilities
  • Differences in competitiveness
  • The changing nature of a market when interest rates change
  • Secondary effects, especially potentially adverse effects, resulting from any of the primary effects above. For example, potential breaches of interest cover covenants.


Sometimes written 'interest-rate risk'.

Not to be confused with Internal Rate of Return, which is also abbreviated to IRR.


See also


Other resource

The devil is in the detail, The Treasurer, 2015