Interest rate risks refer to the potential losses that can occur when interest rates change. This type of risk affects investments, mortgages, and other financial instruments that are tied to a specific interest rate. When interest rates rise or fall, it can cause the value of these instruments to decrease significantly. For example, if an investor holds a bond with a fixed-rate coupon and interest rates increase, the bond's price will drop as its yield becomes less attractive than higher yielding alternatives. Market Making Similarly, borrowers may face increased repayment costs on variable rate mortgages if base lending rates go up. The5ers To mitigate these risks, investors can diversify their portfolios by investing in different types of bonds with varying maturities and coupons while borrowers may opt for fixed-rate mortgage products instead. Double-Click Issue on iOS Safari with WP Rocket
