Prepayment risk: Difference between revisions
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The financial institution therefore has an interest rate exposure for the - as yet unknown - prepayments by customers of its fixed interest rate product. | The financial institution therefore has an interest rate exposure for the - as yet unknown - optional prepayments by customers of its fixed interest rate product. | ||
Revision as of 12:19, 12 November 2016
Prepayment risk is a form of interest rate risk for a financial institution.
It arises from the non-contractual early repayment by customers of, for example, fixed rate mortgages.
The financial institution therefore has an interest rate exposure for the - as yet unknown - optional prepayments by customers of its fixed interest rate product.
