Prepayment risk

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.

See also

• Early Repayment Charge
• Extension risk
• Interest rate risk
• Option risk
• Pipeline risk
• Prepayment
• RMBS