Interest rate risk

The exposure of a portfolio's value or a firm's earnings to a change in interest rates.

A ₹5,000 crore bond portfolio with a modified duration of 6.8 loses about ₹340 crore in value if yields rise by one percentage point.

For a bank the risk appears twice: as a mark-to-market loss on the securities book, and as a squeeze on the margin when assets and liabilities reprice at different speeds.

The measure of the second is the repricing gap, disclosed by time bucket.