Okuzeka
Finance & Banking vocabulary · Risk Management

Extension risk

Meaning in finance & banking, with examples

nounAdvanced term

In finance & banking, extension risk means: The risk that repayments arrive later than expected, extending the life of an investment.

In Turkish: vadenin uzaması riski

How it is used

Use particularly where expected repayment depends on borrower prepayments, not only contractual maturity.

Example sentences

  1. Slower mortgage prepayments increased extension risk for the securities portfolio.

    Cash returns later when borrowers prepay less quickly.

  2. The manager tested extension risk before revising the portfolio's funding plan.

    Longer asset life can change the funding period needed.

Common collocations

  • measure extension risk
  • extension risk scenario
  • maturityThe date when a loan, deposit or bond ends and the principal must be repaid, or the length of time until that date.
  • early repaymentPaying back all or part of a loan before the dates set in the contract, which reduces the total interest the borrower pays.

More terms: Risk Management

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This page explains English vocabulary for learners. It is not financial advice.