Interest Rate Sensitivity
Generally, the longer the maturity of the asset, the more sensitive the asset will be to changes in interest rates. Changes in interest rates are watched closely by bond and fixed income traders, as the resulting price fluctuations will affect the overall yield of the securities. Investors who understand the concept of duration can immunize their fixed-income portfolios to changes in short-term interest rates.
Investment dictionary. Academic. 2012.
Look at other dictionaries:
Interest rate risk — is the risk (variability in value) borne by an interest bearing asset, such as a loan or a bond, due to variability of interest rates. In general, as rates rise, the price of a fixed rate bond will fall, and vice versa. Interest rate risk is… … Wikipedia
Interest rate analysis — Is used to show the analysis on what if situations if the mismatched book is closed at the market rate and what will happen to the interest flow if market rates go up/down by a certain percentage. The total interest book is split into two… … International financial encyclopaedia
Interest rate change sensitivity — Refer instead to Risk management and Break even rate … International financial encyclopaedia
sensitivity — sen‧si‧tiv‧i‧ty [ˌsensˈtɪvti] noun [uncountable] 1. the degree to which something is likely to be affected by something else: • Because of their sensitivity to aluminum ingot prices, both companies expect a fall in profits. • Particular areas… … Financial and business terms
Interest sensitivity gap — The interest sensitivity gap was one of the first techniques used in asset liability management to manage interest rate risk. The use of this technique was initiated in the middle 1970s in the United States when rising interest rates in 1975 1976 … Wikipedia
Interest Sensitive Stock — Any stock with a price that is extremely sensitive to changes in interest rates. Interest sensitive stocks are shares that will see large price changes relative to small movements in the risk free rate. Stocks with large betas, which gauge a… … Investment dictionary
Interest Sensitive Assets — Assets held by a bank that are vulnerable to changes in interest rates. This change can occur either when the asset matures or when it is repriced according to an index rate. The value of these assets is adjusted according to the rise or fall of… … Investment dictionary
Sensitivity — The magnitude of a financial instrument s reaction to changes in underlying factors. Financial instruments, such as stocks and bonds, are constantly impacted by many factors. Sensitivity accounts for all factors that impact a given instrument in… … Investment dictionary
Sensitivity — Refer instead to Constant rate in interest sensitivity analysis, risk management and break even rate … International financial encyclopaedia
Floating rate note — Floating rate notes (FRNs) are bonds that have a variable coupon, equal to a money market reference rate, like LIBOR or federal funds rate, plus a spread. The spread is a rate that remains constant. Almost all FRNs have quarterly coupons, i.e.… … Wikipedia