Prepayment Risk definition

Prepayment Risk. The risk that, during periods of falling interest rates, borrowers may pay off their mortgage loans sooner than expected, forcing a mutual fund to reinvest the unanticipated proceeds at lower interest rates and resulting in a decline in income.
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Prepayment Risk. Similar to call risk, in case of individual bonds, including mortgage-backed bonds, prepayment risk is the risk that the issuer of a security will repay principal prior to the bond’s maturity date, thereby changing the expected payment schedule of the bonds. Tax Considerations: Income from investments is subject to tax as per the provisions of Income Tax Act, as amended from time to time. The following heads of income from investments are subject to tax, unless specifically exempt: dividend income, interest income and realised capital gain. Income from investments may be in the form of interest or dividend and is taxable as income from other sources. The tax treatment for both these types of income is different. Investment in securities will classify as capital assets as per the definition of Capital Assets under Section 2(14) of the Income Tax Act and a capital gain/loss from the sale or transfer of such asset (also known as realised gains/losses) can be a short term capital gain/loss or long term capital gain/loss depending upon the period for which it was held by the investor (Client) and taxed accordingly. Every purchase and sale of securities (including equity and unit of equity oriented mutual fund) listed on recognized stock exchanges in India also attract a direct tax called Securities Transaction Tax (STT).STT is computed on the amount of redemption or sales value and is reduced from the redemption or sales proceeds paid to the investor (Client). Tax calculated on your investment products depends on factors such as what kind of instruments you have invested in, the duration of your investment, and which income tax slab you belong to. The Client should consult a tax professional or a qualified Chartered Accountant regarding the tax implications of the investing of his assets and the filing of his tax returns. NAME: MR/MS. EDUCATIONAL QUALIFICATION: In case of an investment account, Kedia shall provide advice only on zero-commission products where possible and hence shall be remunerated solely through Advisory Fees. This is the ongoing fees for the advisory services provided by ▇▇▇▇▇ to the Client and is charged on the total AUA. The Advisory Fees can be a fixed rate or a percentage of the AUA or a slab wise rate. Asthe Kedia Wrap Account is a multi-product account, the Advisory Fee will be charged across all the products advised.
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Prepayment Risk. Prepayment risk applies to mortgage-backed securities. This risk exists when borrowers pay off their mortgage loans faster than anticipated, which may cause an owner of mortgage-backed securities to reinvest principal proceeds at lower prevailing interest rates. Regulatory Risk: Regulatory risk exists when potential changes in the regulation of securities markets or in the broader economy negatively impact the prices or liquidity of securities held in an investment fund. Investment Risk by Fund Option Money Market U.S. Bond U.S. Stock Int’l Stock TAX CONSIDERATIONS
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Examples of Prepayment Risk in a sentence

  • See “Risks and Special Considerations—Illiquid Securities Risk.” Prepayment Risk.

  • Risks Associated with Mortgage-Backed Securities: These include Market Risk, Interest Rate Risk, Credit Risk, Prepayment Risk as well as the risk that the structure of certain mortgage- backed securities may make their reaction to interest rates and other factors difficult to predict, making their prices very volatile.

  • Prepayment Risk — The risk that, during periods of falling interest rates, borrowers may pay off their mortgage loans sooner than expected, forcing a fund to reinvest the unanticipated proceeds at lower interest rates and resulting in a decline in income.

  • 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.

  • Prepayment Risk — When interest rates fall, certain obligations will be paid off by the obligor more quickly than originally anticipated, and the Fund may have to invest the proceeds in securities with lower yields Volatility Risk — Volatility is defined as the characteristic of a security, an index or a market to fluctuate significantly in price within a short time period.

  • Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the Prepayment Risk.

  • 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.

  • 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.

  • Interest Rate Risk; Equity Market Risk; Extension Risk; Liquidity Risk; Prepayment Risk; Regulatory Risk | 9 Due to the low interest rate environment, the Florida Prepaid College Board approved and allowed the administrative fee (75 basis points) to be reduced for the Fund.

  • 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 Prepayment Risk

Prepayment Risk. The risk that the actual prepayment of principal is different from the expected prepayment speed assumptions, thereby affecting the actual market price and yield of the investment. Market Risk — The risk that the market price of the security will decline substantially for reasons such as market pricing aberrations, and changes in supply and demand characteristics of a particular security market(s). Market risk is also used synonymously for Price Risk, which results from some of the previously listed sources as well as other financial variables to which a specific security may be linked for purposes of deriving its interest and principal cash flows. Operating Risk — The potential risk ofloss because of inadequate policies, procedures, controls, error, fraud, etc.
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Related to Prepayment Risk

  • Discount Range Prepayment Amount has the meaning set forth in Section 2.05(a)(v)(C)(1).

  • ECF Prepayment Amount has the meaning assigned to such term in Section 2.11(b)(i).

  • Reinvestment Prepayment Amount with respect to any Reinvestment Event, the Reinvestment Deferred Amount relating thereto less any amount expended prior to the relevant Reinvestment Prepayment Date to acquire or repair assets useful in the Borrower’s business.

  • Discount Range Prepayment Notice means a written notice of a Borrower Solicitation of Discount Range Prepayment Offers made pursuant to Section 2.11(a)(ii)(C) substantially in the form of Exhibit K.

  • Prepayment Amount means the amount required to prepay the Annual Special Tax obligation in full for an Assessor’s Parcel as described in Section G.