What is the name for the risk that an investment’s value will fall because interest rates change?

Interest-rate risk is the risk that an investment’s value will fall because interest rates change.

It is especially important for fixed-rate bonds. When market rates rise, newly issued bonds may offer more attractive payments, so existing bonds with lower coupons generally decline in price. When market rates fall, existing higher-coupon bonds can become more valuable. The effect is usually larger for bonds with longer maturities or greater duration.

Interest-rate risk is not the same as credit risk, which concerns an issuer’s ability to make payments. It also differs from inflation risk, which concerns the purchasing power of future cash flows. A bond held until maturity may still repay its principal if the issuer remains solvent, but its market value can fluctuate substantially before then.