Extension risk and Principal: Difference between pages

Revision as of 07:20, 14 December 2014

1.

An individual or other legal person represented by an agent.

2.

A legal person acting on their own behalf.

3.

The amount of an investment or a loan, excluding any interest.

When the whole of a loan is drawn down at the start, the principal is simply the amount originally borrowed.

4.

The reference amount of a traded financial instrument, used to determine its future cashflows.

5.

Most important, or largest.

Not to be confused with principle, which is different.

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-Extension risk is a form of liquidity risk and interest rate risk for a financial institution.
+.
-It arises from the later than expected repayment by customers of, for example, residential mortgages.
+An individual or other legal person represented by an agent.
-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.
+.
+A legal person acting on their own behalf.
+.
+The amount of an investment or a loan, excluding any interest.
+When the whole of a loan is drawn down at the start, the principal is simply the amount originally borrowed.
+.
+The reference amount of a traded financial instrument, used to determine its future cashflows.
+.
+Most important, or largest.
+Not to be confused with ''principle'', which is different.
 == See also ==
-* [[Interest rate risk]]
+* [[Acceleration]]
-* [[Mortgage]]
+* [[Agency]]
-* [[Pipeline risk]]
+* [[Agent]]
-* [[Prepayment risk]]
+* [[Arm’s length principle]]
-* [[RMBS]]
+* [[Coupon rate]]
+* [[Dual currency bond]]
-[[Category:Identify_and_assess_risks]]
+* [[Foreign currency bond]]
+* [[Forward forward contract]]
+* [[Non-performing loan]]
+* [[Paying agent]]
+* [[Point]]
+* [[Self-financing loan]]
+* [[Separate personality principle]]
+* [[Annuity factor]]
+* [[Instalment]]