Two risk components of interest rate risk
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What are the two risk components of interest rate risk? Relative to them, what are the implications of holding a bond to its duration versus holding the bond to maturity? (Be careful to explain the relation of Duration to Interest Rate Risk.)
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This solution provides details on the two risk components of interest rate risk. The expert briefly explains the implications of holding a bond to its duration versus holding the bond to maturity.
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Hello,
The two components of interest rate risk are the term structure risk (aka options or repricing risk) and the volatility risk.
The term structure risk is risk from changes in the fixed income term structure. It arises if interest rates are fixed on liabilities for periods that differ from ...
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