Business and Personal Finance Dictionary

# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z 

• OPTION RISK
  
  The risk that a change in prevailing interest rates will lead to an adverse impact on earnings or capital caused by changes in the timing of cash flows from investments. Cash flows may be received earlier than expected as a result of the exercise of options or of embedded options in financial contracts. One of the four primary components of interest rate risk. Option risk usually arises when a change in prevailing interest rates prompts the option holder to exercise the option. See option.
  
  Back