Business and Personal Finance Dictionary

# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z 

• EXTENSION RISK
  
  The risk that rising interest rates may slow prepayment speeds and therefore cause an investment in a pass-through or CMO MBS to last longer than the investor anticipated. By taking longer to return the investor's principal, the extension of the MBS prevents the investor from taking advantage of higher rates available from other investments.
  
  Back