Interest Rate Risk

Monday, September 1st, 2014

The risk that a receivable or the value of a portfolio will decrease due to movements in interest rates. Whilst various forms of receivables discounted in trade and forfaiting have their face value reduced by the respective discount rate for the tenor of the period of the receivable to their present value and if the holder of such instrument does not match the funding period or buy a derivative hedge, then the receivable or portfolio will be exposed to interest rate risk.