# Maturity risk

- Canonical URL: https://www.gerhardmerk.de/maturity-risk
- Post ID: 592676
- Modified: 2023-07-25T21:02:35+00:00
- Language: en

## Definition

In the case of a fixed-rate loan granted by the bank, the risk that the interest rate will increase until the facility is called by the borrower; in other words, the bank granting the loan will have to refinance at a higher interest rate on the interbank market or with the central bank than it has charged the customer. This risk must be covered by appropriate precautions, such as provisions for contingent losses or interest rate swaps. - The risk posed by changes in interest rates on the price of a bond. Put simply, the bond with the longer remaining term to maturity of two bonds from the same issuer with otherwise identical features carries the greater risk. This is because this security is still subject to interest rate risk over a longer period of time. The price will therefore generally be lower and subject to greater fluctuations (oscillations: fluctuations above and below a mean value) when interest rates change. According to a rule of thumb on the stock exchange, the price fluctuation corresponds to the change in the interest rate level times the remaining term to maturity in years. - See bond, duration, contingent loss, loan commitment, irrevocable, liquidity premium, term-fixed, floating-rate debt instrument, interest rate swap. Attention: The financial encyclopedia is protected by copyright and may only be used for private purposes without express consent! University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec. Professor Dr. Eckehard Krah, Dipl.rer.pol. E-mail address: info@ekrah.com https://de.wikipedia.org/wiki/Gerhard_Ernst_Merk https://www.jung-stilling-gesellschaft.de/merk/ https://www.gerhardmerk.de/

## Machine-readable

- Generator: Merk Knowledge 1.1.1