interest rate risk

Probability of that exist differents changes in the future risk of interest rates.

This concept is a factor to be taken into account when we prepare to make an investment, since it refers to possible changes in interest rates. Such changes may cause an increase or decrease in value of investments. Its effect is explained as follows: if the risk of interest rate increases, the values ??of fixed income investments (government bonds) fall; on the contrary, if this low rate risk, bond values ??rise.

The most important factors affecting this rate are:

1. monetary policy to control the amount of money in circulation.

2. Public deficit, bonds issued by the state to capture the resources available to private investors. Those bonds use to compete against private companies who also want to raise funds.

3. A inflation.

4. Rates of interest from other countries.

This risk may be reduced provided when the investor decides to invest in shorter-term bonds, although in the risk also is influenced by the quality of the issuing institution of the same. However, an investment in long-term bonds, will be seen clearly affected by changes in the interest rate, so that a minimal change in this rate will affect in a much higher percentage, both to increase as to decrease the value of the invest.


Interest rate risk

Interest rate risk

What is Interest Rate Risk?

What is Interest Rate Risk?