Risk Terms

Extension Risk

Definition

What is Extension Risk?

The risk that expected principal repayment is delayed, often when interest rates rise.

Example in practice

Mortgage repayments slow and the security's effective maturity lengthens.

Keep learning

The possibility of loss because broad market prices or rates move against an investment.

The possibility that a borrower or issuer will fail to make promised payments or suffer a downgrade.

The possibility that changing market interest rates will reduce an investment's value or income appeal.

A day on which relevant financial institutions and markets are open for normal processing.

Think you know your investing terms?

Put your knowledge to the test with a quick quiz.