Is there a difference between interest rate risk vs duration risk? I feel as though I have heard them used interchangeably but I don't know if there is any distinguishing factor between the two.
1 Answer
Interest rate risk is way broader.
- you can have basis risk,
- repricing risk,
- prepayment risk
- with equity and FX options you have rho and phi and might face early exercise
- Banks need to compute several measures like IRRBB (interest rate risk in the banking book) which is computed as a repricing gap of the products
- GAP risk between assets and liabilities (Keyword SVB collapse)
- Value at risk)
- ...