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(1) An adverse variation in cost or return caused by a change in the absolute level of interest rates, in the spread between two rates, in the shape of the yield curve, or in any other interest rate relationship. (2) Exposure to accounting or opportunity loss as a result of a relative or absolute change in interest rates. Varieties of interest rate risk include prepayment risk, reinvestment risk, volatility risk, call risk, and long-term rate risk. A variety of instruments are available to reduce or eliminate most kinds of interest rate risk.
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