DEFINITION of 'Rate Level Risk'
A type of interest rate risk which asserts that the characteristics of interest rate fluctuation are variable (as opposed to constant) over a period of time. Although interest rates are expected to fluctuate over the period of an investment, the probability of an interest rate change is not always constant, nor is the magnitude of the volatility of interest rate changes.
Next Up
BREAKING DOWN 'Rate Level Risk'
Generally speaking, it is impossible to predict with certainty the characteristics of a changing variable such as interests rates into the future. While it is possible to make reasonably accurate predictions, some amount of uncertainty still exits. This uncertainty represents a tangible risk, which must be incorporated into the price of an investment vehicle.
RELATED TERMS

Variable Interest Rate
An interest rate on a loan or security that fluctuates over time, ... 
Variable Rate Mortgage
A type of home loan in which the interest rate is not fixed. ... 
Capped Rate
An interest rate that is allowed to fluctuate, but which cannot ... 
Lock Period
A number of days, often 30 or 60, during which the interest rate ... 
Floating Interest Rate
An interest rate that is allowed to move up and down with the ... 
Interest Rate Risk
The risk that an investment's value will change due to a change ...
Related Articles

Trading
Managing Interest Rate Risk
Interest rate risk stems from the possibility that an interestbearing assetâ€™s value will change due to changing interest rates. 
Markets
Forces Behind Interest Rates
Interest is a cost for one party, and income for another. Regardless of the perspective, interest rates are always changing. 
ETFs & Mutual Funds
How Interest Rates Affect Mutual Funds
Find out how changing interest rates impact mutual funds, including bond and money market funds, and how higher rates can discourage investors. 
Markets
Will Higher Interest Rates Hurt Trading Activities?
Do higher interest rates lead to less trading and lower interest rates lead to more trading? Investopedia debunks common myths around interest rates and trading. 
Markets
When Will Interest Rates Rise?
Find out if  and why  the Federal Reserve will keep raising interest rates and what that might mean for savers, investors and the entire economy. 
Markets
Understanding Interest Rates: Nominal, Real And Effective
Interest rates can be broken down into several subcategories that incorporate various factors such as inflation. Smart investors know to look beyond the nominal or coupon rate of a bond or loan ... 
Investing
Why Interest Rates Affect Everyone
Learn why interest rates are one of the most important economic variables and how every individual and business is affected by rate changes. 
Markets
10 Countries With Lower Interest Rates Than the US
Learn about the 10 countries with lower interest rates than the United States and how interest rates indicate a country's economic outlook. 
Markets
How & Why Interest Rates Affect Options
The Fed is expected to change interest rates soon. We explain how a change in interest rates impacts option valuations. 
Markets
Implications of the Federal Reserve's Impending Rate Hike
The Federal Reserve begins its twoday meeting on Wednesday, September 16, and everyone is watching to see if the central bank will raise the United States target interest rate for the first ...
RELATED FAQS

How can an investor reduce interest rate risk?
Learn about the different ways investors can reduce interest rate risk. Locking in interest rates increases certainty for ... Read Answer >> 
How do interest rates impact risk aversion in the market?
Learn why interest rates and risk aversion have an endogenous relationship in the market, and why interest rates play such ... Read Answer >> 
What is the difference between real and nominal interest rates?
Learn what nominal interest rates and real interest rates are, how real interest rate takes into account the inflation rate, ... Read Answer >> 
What types of companies benefit from reporting results utilizing constant currencies ...
Understand constant currency figures, and explore some of the reasons why a company is likely to benefit from reporting using ... Read Answer >> 
What is affected by the interest rate risk?
Find out more about interest rate risk, how bond prices are affected by interest rate fluctuations and how interest rate ... Read Answer >> 
What does a climbing interest rate risk signify about the economy?
Learn what a climbing interest rate risk signifies for the economy. Interest rate risk is heightened with inflationary pressures ... Read Answer >>