Extension Risk Financial Glossary

What is it? The risk that rising interest rates may slow prepayment speeds and therefore cause an investment in a pass-through or CMO MBS to last longer than the investor anticipated. By taking longer to return the investors principal, the extension of the MBS prevents the investor from taking advantage of higher rates available from other investments.

Finance Term Definition Added By: Keira

The Extension Risk definition has been viewed 2692 Time(s)!

Send To Friends!

If you'd like to send the Extension Risk definition to yourself or to your friends/colleagues, just enter the e-mail addresses in the boxes below -

We hope you now understand the meaning of Extension Risk. If you need any more information on this term, please don't hesitate to contact us.

Other Similar Finance Terms:

Financial Term Debit is A dollar amount that appears on the left-hand side of an account ledger. Use debit to record an increase in an asset or a decrease in a liability or in owners equity.

Financial Term Preferred Stock is A class of stock that generally pays dividends at a set rate, and is given preference with regard to the payment of dividends and the distribution of corporate assets in the event of liquidation. Preferred stock generally does not have voting rights.

Financial Term Life insurance ISA is An ISA that allows you to invest in life insurance investments without paying tax on the money you make.

Financial Term Leasing is A method of renting the use of vehicles, machinery and equipment. The items do not belong to us, but are the property of the leasing company to whom we pay rentals.

Financial Term LBO (Leverage Buyout) is A corporate restructuring where the existing shareholders sell their shares to a small group of investors. The purchasers of the stock sue the firms unused bet capacity to borrow the funds to pay for the stock. Typically the company becomes private.