Extension Risk definition

Extension Risk. The risk that, during periods of rising interest rates, borrowers may pay off their mortgage loans later than expected, preventing a mutual fund from reinvesting principal proceeds at higher interest rates and resulting in less income than potentially available. Floating and Variable Rate Securities Risk: Floating and variable rate securities provide for a periodic adjustment in the interest rate paid on the securities. The rate adjustment intervals may be regular and range from daily up to annually, or may be based on an event, such as a change in the prime rate. Floating and variable rate securities may be subject to greater liquidity risk than other debt securities, meaning that there may be limitations on a mutual fund’s ability to sell the securities at any given time. Such securities also may lose value.

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Extension Risk. The issuer of a security may repay principal more slowly than expected because of rising interest rates. In this event, short- and medium-duration securities are effectively converted into longer-duration securities, increasing their sensitivity to interest-rate changes and causing their prices to decline. Financials Sector Risk: Concentrating assets in the financials sector may disproportionately subject the portfolio to the risks of that industry, including loss of value because of economic recession, availability of credit, volatile interest rates, government regulation, and other factors.

Extension Risk. Extension risk is the risk that, when interest rates rise, certain obligations will be paid off more slowly than anticipated and the value of these securities will fall.

Examples of Extension Risk in a sentence

• Reports must be submitted through the online Extension Risk Management Education (ERME) Results Verification System (RVS).

• Reports must be submitted through the online Extension Risk Management Education Results Verification System (RVS).

• Extension Risk adjustment will be applied to the Extension population using CDPS + Rx. Risk adjustment is performed on a budget neutral basis at the region and rate cell level.

• Because the High Equity Balanced Option invests in multiple mutual funds that, taken together, invest in a diversified portfolio of securities, it is subject to the following risks to varying degrees: Active Management Risk; Allocation Risk; Call Risk; Credit Risk; Currency Risk; Currency Management Strategies Risk; Derivatives Risk; Downgrade Risk; Emerging Markets Risk; Extension Risk; Fixed-Income Foreign Investment Risk; Foreign Investment Risk; Investment Objective.

• Active Trading Risk; Call Risk; Country/Political Risk; Currency Risk; Credit Risk; Derivatives Risk; Duration/Interest Rate Risk; Extension Risk; Liquidity Risk; Prepayment Risk; Regulatory Risk Summary: The Fixed Income Fund is an actively managed bond fund including investments in U.S. Treasury and U.S. Government Agency obligations, as well as, corporate debt instruments.

• Through its investments in the fund above, this Investment Portfolio is subject to the following investment risks (in alphabetical order): Call Risk, Credit Risk, Extension Risk, Income Risk, Index Sampling Risk, Interest Rate Risk, Liquidity Risk and Prepayment Risk.

• Through its investments in the fund above, this Investment Portfolio is subject to the following investment risks (in alphabetical order): Bond Market Risk, Call Risk, Credit Quality Risk, Cybersecurity Risk, Extension Risk, Foreign Securities Risk, Government Obligations Risk, Liquidity Risk, Management Risk, Mortgage- and Asset-Backed Debt Obligations Risk, Municipal Obligations Risk, Recent Market Events Risk, Sector Risk and Valuation Risk.

• The Index Fixed-Income Option is subject to the following risks to varying degrees: Call Risk; Credit Risk; Downgrade Risk; Extension Risk; Fixed-Income Foreign Investment Risk; Income Volatility Risk; Index Risk; Interest Rate Risk; Issuer Risk; Liquidity Risk; Market Volatility, Liquidity and Valuation Risk; Prepayment Risk; and U.S. Government Securities Risk.

• Extension Risk — The risk that, during periods of rising interest rates, borrowers may pay off their mortgage loans later than expected, preventing a fund from reinvesting principal proceeds at higher interest rates and resulting in less income than potentially available.

• Through its investments in the mutual funds above, this Investment Option is subject to Active Management Risk, Call Risk, Credit Risk, Derivatives Risk, Emerging Markets Risk, Extension Risk, Fixed-Income Foreign Investment Risk, Income Volatility Risk, Index Risk, Interest Rate Risk, Issuer Risk, Market Volatility, Liquidity and Valuation Risk (types of Market Risk), Non-investment Grade Securities Risk, Prepayment Risk and Special Risks for Inflation- Indexed Bonds.

More Definitions of Extension Risk

Extension Risk. Extension risk applies to mortgage-backed securities. This risk exists when borrowers pay off their mortgage loans later than expected which prevents an owner of mortgage-backed securities from reinvesting principal proceeds at higher prevailing interest rates. Income Risk: Income risk is the chance that a fund’s income will decline because of falling interest rates. Index Sampling Risk: Index sampling risk is the chance that the securities selected for a fund will not provide investment performance matching that of the target index.