Prepayment risk and RFR: Difference between pages

Revision as of 12:29, 24 March 2019

Risk-Free Rate.

The abbreviation 'RFR' usually refers to risk-free benchmark interest rates, such as SONIA.

Also known as near risk-free rates, recognising that such rates are never entirely risk-free.

Theoretically risk free rates of investment return, for example in the Capital asset pricing model, are more often designated by 'Rf' or 'rf'.

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-Prepayment risk is a form of interest rate risk for a financial institution.
+Risk-Free Rate.
-It arises from the non-contractual early repayment by customers of, for example, fixed rate mortgages.
+The abbreviation 'RFR' usually refers to risk-free benchmark interest rates, such as SONIA.
+Also known as ''near'' risk-free rates, recognising that such rates are never entirely risk-free.
-The financial institution therefore has an interest rate exposure for the - as yet unknown - prepayments by customers of its fixed interest rate product.
+Theoretically risk free rates of ''investment'' return, for example in the Capital asset pricing model, are more often designated by 'Rf' or 'rf'.
-== See also ==
+==See also==
-* [[Extension risk]]
+*[[Capital asset pricing model]]
-* [[Interest rate risk]]
+*[[O/N]]
-* [[Pipeline risk]]
+*[[RFR WG]]
-* [[RMBS]]
+*[[Risk-free rate of return]]
+*[[Risk-free rates]]
+*[[SONIA]]
-[[Category:Manage_risks]]
+[[Category:Corporate_financial_management]]
+[[Category:Financial_products_and_markets]]