Extension risk and Finance vehicle: Difference between pages

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imported>Doug Williamson
(Typo correction 'extension'.)
 
imported>Doug Williamson
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Extension risk is a form of liquidity risk and interest rate risk for a financial institution.
An operation involving the setting up of an offshore subsidiary for the purpose of issuing debt and lending the borrowings on to the parent or another subsidiary.


It arises from the later than expected repayment by customers of, for example, residential mortgages.
The parent normally guarantees the debt issues.
 
 
The consequence is an extension of the maturity of the mortgage asset, and an increase in the amount and maturity of funding needed to fund the asset for its longer remaining life.




== See also ==
* [[Finance]]
* [[Offshore]]
* [[Special purpose vehicle]]  (SPV)
* [[Vehicle]]


== See also ==
[[Category:Long_term_funding]]
* [[Interest rate risk]]
* [[Mortgage]]
* [[Pipeline risk]]
* [[Prepayment risk]]
* [[RMBS]]

Latest revision as of 06:13, 11 March 2023

An operation involving the setting up of an offshore subsidiary for the purpose of issuing debt and lending the borrowings on to the parent or another subsidiary.

The parent normally guarantees the debt issues.


See also

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