In finance

Finance

"Finance" is often defined simply as the management of money or “funds” management Modern finance, however, is a family of business activity that includes the origination, marketing, and management of cash and money surrogates through a variety of capital accounts, instruments, and markets created...

, rate risk is the risk of losses caused by interest rate

Interest rate

An interest rate is the rate at which interest is paid by a borrower for the use of money that they borrow from a lender. For example, a small company borrows capital from a bank to buy new assets for their business, and in return the lender receives interest at a predetermined interest rate for...

 changes. The prices of most financial instruments, such as stock

Stock

The capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors...

s and bonds

Bond (finance)

In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...

 move inversely with interest rates, so investors are subject to capital loss

Capital loss

Capital loss is the difference between a lower selling price and a higher purchase price, resulting in a financial loss for the seller. The IRS states that "If your capital losses exceed your capital gains, the excess can be deducted on your tax return"....

 when rates rise.

In the investment world, there are two types of risk rating. One is to manifest company's credit and another to equity securities. The former is represented by the systems of Fitch Ratings

Fitch Ratings

The Fitch Group is a majority-owned subsidiary of FIMALAC, headquartered in Paris. Fitch Ratings, Fitch Solutions and Algorithmics, are part of the Fitch Group....

, Moody's

Moody's

Moody's Corporation is the holding company for Moody's Analytics and Moody's Investors Service, a credit rating agency which performs international financial research and analysis on commercial and government entities. The company also ranks the credit-worthiness of borrowers using a standardized...

 and Standard & Poor's

Standard & Poor's

Standard & Poor's is a United States-based financial services company. It is a division of The McGraw-Hill Companies that publishes financial research and analysis on stocks and bonds. It is well known for its stock-market indices, the US-based S&P 500, the Australian S&P/ASX 200, the Canadian...

 whereas the later by that of Comisión Clasificadora de Riesgo

Comisión Clasificadora de Riesgo

Comisión Clasificadora de Riesgo is a Spanish organization which was established in 1985 with the incorporation of Spanish Decree Law Nº 3500 for approving or rejecting domestic and foreign debt instruments and equity securities that can be purchased by Pension Funds...

, although the two types have some similarities to some extent.