extension risk

0.02 sec.

extension risk

The possibility that rising interest rates will slow the rate at which loans in a pool will be repaid, thereby slowing the return of principal to investors who have committed funds to the pool. For example, rising interest rates will reduce the rate at which holders of mortgage-backed securities have their principal returned.

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It assumes the extension risk as part of what it's providing.

Cashing out: Big banks and insurers are putting money into the ... by Panko, Ron / Best's Review

There are risks associated with fixed income investments, including credit risk, interest rate risk, and prepayment and extension risk.

RiverSource Investments Launches its First Advertising Campaign by Business Wire

However on a cautionary note, Lazzara noted that "money market fund investors should be aware of the extension risk posed by ABENs and not place themselves in a situation such that in a market wide extension scenario, the resulting duration extension would cause the weighted average maturity of their portfolio to breach the 90-day 2a-7 limit.

Fitch: Extendible Notes are Liquid, Book to Expected Maturity by Business Wire

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