Okuzeka
Finance & Banking vocabulary · Risk Management

Prepayment risk

Meaning in finance & banking, with examples

nounAdvanced term

In finance & banking, prepayment risk means: The risk that repayment earlier than expected changes an asset's income or value.

In Turkish: erken ödeme riski

How it is used

Describe the lender's or investor's exposure; early repayment is the borrower's action.

Example sentences

  1. Falling mortgage rates increased prepayment risk in the bank's fixed-rate portfolio.

    Borrowers may refinance and end expected interest streams early.

  2. The valuation model used several scenarios for prepayment risk.

    Repayment timing influences the value of future cash flows.

Common collocations

  • assess prepayment risk
  • prepayment risk assumption
  • early repaymentPaying back all or part of a loan before the dates set in the contract, which reduces the total interest the borrower pays.
  • fixed rateAn interest rate that stays the same for the whole loan or deposit term, or for an agreed period, so the payments do not change.

More terms: Risk Management

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