How much do you stand to lose? That is what you really want to know as an investor. Financial institutions are required to report to regulatory authorities on value at risk. We commence by looking at the world of interest rates, the pricing of bonds and the notion of yield to maturity of a bond. We also introduce some bond sensitivity measures such as Duration and Convexity; we will examine Duration in some detail and provide a concrete example.
It is mostly only the downside of risk that is mentioned, rarely a possible upside, i.e. the potential for a gain. While for many people risk has largely negative connotations, it may also represent an opportunity. Much of the financial industry would not exist were it not for the presence of financial risk and the opportunities afforded to companies that are able to create products and services that offer more financial certainty to their clients [ref]Quantitative Risk Management: Concepts, Techniques and Tools
Revised Edition
Alexander J. McNeil, Rüdiger Frey & Paul Embrechts[/ref].