Interest rate risk

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'.

See also

• Asset-liability management
• Double-whammy
• Exposure
• Fair value interest rate risk
• Financial covenant
• Guide to risk management
• Interest cover
• Interest rate
• IRHP
• IRRBB
• Matching
• Pipeline risk
• Portfolio hedging
• Risk-free rate of return
• Shock
• Time bins

Other resources

The devil is in the detail, The Treasurer, 2015