Interest Rate Sensitivity
 |
Definition of 'Interest Rate Sensitivity'A measure of how much the price of a fixed-income asset will fluctuate as a result of changes in the interest rate environment. Securities that are more sensitive will have greater price fluctuations than those with less sensitivity. This type of sensitivity must be taken into account when selecting a bond or other fixed-income instrument that the investor may sell in the secondary market. |
 |
Investopedia explains '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. |
Related Definitions
Articles Of Interest
-
Curbing The Effects Of Inflation
Your investments suffer when general price levels rise. Learn how you can control the damage with IPSs. -
What Investors Should Know About Interest Rates
Understanding interest rates helps you answer the fundamental question of where to put your money. -
Interest Rates And Your Bond Investments
By understanding the factors that influence interest rates, you can learn to anticipate their movement and profit from it. -
Who determines interest rates?
In countries using a centralized banking model, interest rates are determined by the central bank. In the first step of interest rate determination, the government's economic observers create ... -
All About Inflation
What causes inflation? How does it affect your investments and standard of living? This tutorial has the answers. -
Perpetual Bonds: An Overview
A perpetual bond makes interest payments to the investor forever. This type of bond holds a certain appeal to both the issuer and buyer. -
Introduction To STRIPS
STRIPS provide an alternative form of bond for fixed-income investors who need definite cash flows at specific times. Read the article to find out how. -
The Wonders Of Convertible Bonds
Ever wondered what exactly a convertible bond does? Read the features of a convertible bond and learn how important the conversion factor is to you as an investor. -
All About Zero Coupon Bonds
Zero-coupon bonds are bonds that do not make any interest payments (which investment professionals often refer to as the "coupon") until maturity. For investors, this means that if you make an ... -
Know Your Cost Basis For Bonds
Nobody likes taxes, but tax reporting is an inevitable and unavoidable part of investing. If you buy stock, determining your costs basis is a slightly frustrating but fairly straightforward exercise. ...
Free Annual Reports