User:Vinodjetley/Interest Rate Risk

The interest rate risk can be defined as the risk which you carry on your portfolio on account of the future interest rate changes. Its impact can be studied on the 'Net Interest Income' or the 'Market Value' of portfolio(comprising of assets and liabilities). It can be measured in terms of Macaulay duration or Modified duration. Macaulay duration represents the weighted average time to repricing of the portfolio. The Modified duration is the percentage by which the portfolio will lose its value by 1% rise in the interest rates.