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Risk of an increasing interest rate

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** Could you please check if these are missing anything extra inside. I want to know the best possible scenario maybe missed***

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Some Internet research may be required to answer this question, although it's not absolutely necessary.

What could you do to protect your bond portfolio against the following kinds of risk?

A. Risk of an increasing interest rate

Forward rate agreements can be used for hedging against the risk of an increasing interest rate.

B. Risk of inflation increasing

Using fixed interest rates will shield against the risk of inflation.

C. Risk of volatility in the markets

Diversifying by investing in different securities in the market. By investing in two difference securities reduces your risk of losing all your money. Your possible returns are reduced from losing all your investment, to losing only some of it. A swap agreement can also be used.

Reference no: EM132364365

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