BROWSE

Rate Level Risk

What is '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.

Explaining '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.


Further Reading


Exchange rate risk and Philippine stock returns: before and after the Asian financial crisis
www.tandfonline.com [PDF]
… 4 Using the Augmented Dickey–Fuller test, the unit root hypothesis for both series is rejected at 0.01 level of significance. References. References … The pricing of interest rate risk: evidence from the stock market … The Philippine Review of Economics, 24: 121–41. [Google Scholar] …

Fair value of liabilities: the financial economics perspectiveFair value of liabilities: the financial economics perspective
www.tandfonline.com [PDF]
… 4 Using the Augmented Dickey–Fuller test, the unit root hypothesis for both series is rejected at 0.01 level of significance. References. References … The pricing of interest rate risk: evidence from the stock market … The Philippine Review of Economics, 24: 121–41. [Google Scholar] …

Exchange-rate uncertainty and workers' remittancesExchange-rate uncertainty and workers' remittances
www.tandfonline.com [PDF]
… 4 Using the Augmented Dickey–Fuller test, the unit root hypothesis for both series is rejected at 0.01 level of significance. References. References … The pricing of interest rate risk: evidence from the stock market … The Philippine Review of Economics, 24: 121–41. [Google Scholar] …

A habit‐based explanation of the exchange rate risk premiumA habit‐based explanation of the exchange rate risk premium
onlinelibrary.wiley.com [PDF]
… 4 Using the Augmented Dickey–Fuller test, the unit root hypothesis for both series is rejected at 0.01 level of significance. References. References … The pricing of interest rate risk: evidence from the stock market … The Philippine Review of Economics, 24: 121–41. [Google Scholar] …

The effects of real exchange rate risk on international tradeThe effects of real exchange rate risk on international trade
www.sciencedirect.com [PDF]
… 4 Using the Augmented Dickey–Fuller test, the unit root hypothesis for both series is rejected at 0.01 level of significance. References. References … The pricing of interest rate risk: evidence from the stock market … The Philippine Review of Economics, 24: 121–41. [Google Scholar] …

Can hedging tell the full story? Reconciling differences in United States aggregate-and industry-level exchange rate risk premiumCan hedging tell the full story? Reconciling differences in United States aggregate-and industry-level exchange rate risk premium
www.sciencedirect.com [PDF]
… 4 Using the Augmented Dickey–Fuller test, the unit root hypothesis for both series is rejected at 0.01 level of significance. References. References … The pricing of interest rate risk: evidence from the stock market … The Philippine Review of Economics, 24: 121–41. [Google Scholar] …

Growth and risk at the industry level: The real effects of financial liberalizationGrowth and risk at the industry level: The real effects of financial liberalization
www.sciencedirect.com [PDF]
… 4 Using the Augmented Dickey–Fuller test, the unit root hypothesis for both series is rejected at 0.01 level of significance. References. References … The pricing of interest rate risk: evidence from the stock market … The Philippine Review of Economics, 24: 121–41. [Google Scholar] …

The pricing of exchange rate risk in the stock marketThe pricing of exchange rate risk in the stock market
www.jstor.org [PDF]
… 4 Using the Augmented Dickey–Fuller test, the unit root hypothesis for both series is rejected at 0.01 level of significance. References. References … The pricing of interest rate risk: evidence from the stock market … The Philippine Review of Economics, 24: 121–41. [Google Scholar] …



Q&A About Rate Level Risk


What does the term "probability distribution function" mean?

A probability distribution function means that you can assign probabilities for different levels of change in an investment's value based on historical data.

How can you incorporate uncertainty into an investment vehicle's price?

Uncertainty must be incorporated into the price of an investment vehicle by using a probability distribution function.

What is rate level risk?

Rate level risk is 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.

Is it possible to predict future changes in interest rates with certainty?

No, it is not possible to predict future changes in interest rates with certainty.

Leave a Reply

Your email address will not be published. Required fields are marked *