Is there a difference between yield risk and interest rate risk?
I would say “interest rate risk” is a broader concept. yield is a one-dimensional concept, while “interest rate” could mean the whole curve. yield could also include the yield spread.
So yield risk doesn’t refer to yield curve risk? Yield curve risk is part of interest rate risk?
I would say that isn’t so clearly defined. If you say “interest rate risk” I would think of the whole interest rate curve moving. When you have a swap you are exposed to interest rate risk. When you look at a bond, which has a yield, this yield can be decomposed into yield spread and “risk free” yield. Yield risk here could mean both the spread and the risk free rate. You wouldn’t really talk about “yields” in the context of swaps, for example. (Well, I would not.)
Second Martin’s comments. When ppl talk about IRs, I think they’re usually talking about treasury or swap rates.
Interest rate risk is level of the yield curve. Yield risk is the twist of the yield curve.
hi, > Interest rate risk is level of the yield curve. > > Yield risk is the twist of the yield curve. no, this is for sure no standard understanding of these terms.
^Didn’t say those are the standard understanding. However, given the material, given a yield curve. Interest rate is the upward/downward shift of the curve; yield(curve) risk is the twist or hump of the curve.