Prepayment risk, which is associated with the risk of prepayments, consists of:

Name: Prepayment risk, which is associated with the risk of prepayments, consists of:
Brand: Quizplus
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Question

Quizplus · Accepted Answer

Prepayment risk includes both contraction risk, where borrowers pay off loans earlier than expected, leading to a shorter cash flow period, and extension risk, where loans are paid off more slowly than expected, extending the cash flow period. Default risk is not considered a part of prepayment risk.

Prepayment Risk, Which Is Associated with the Risk of Prepayments