Interest-rate risk
The risk that changes in interest rates alter an investment’s value, especially a bond.
Definition
The risk that changes in interest rates alter an investment’s value, especially a bond.
Why this concept matters
It explains why a bond may fall even when its issuer continues to pay.
What to watch
Longer-dated bonds are generally more sensitive to rate changes.
Simple example
When market rates rise, an older low-coupon bond may lose value.
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