Therefore the most important contributor to the total value at risk is the large exposure to copper which also has the highest volatility. Reinvestment risk arises from having to reinvest future cash flows at lower interest rates than anticipated. A higher interest rate leads to a larger terminal value. The opposite is known as put risk. It interacts with prepayment risk.
Credit risk affects the valuation of interest rate sensitive assets subject to potential default.
The risk is that, instead of dropping, interest rates increase. Then the cost of servicing the loan will rise. With a loan where the interest is predetermined there is no uncertainty as to the future cash flows. Parallel 3.242 Rotational 2.683 Note an alternative interpretation of what the yield curve rotation means gives a rotational value of 2.711. To understand the dynamics of the firm.