Prepayment risk - Financial definition
Financial acronyms
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Concise definition of the term prepayment risk
Refers to the risk in classic mortgage-backed securities that the mortgages in the pool will be repaid by borrowers quicker than expected (probably because interest rates have fallen making it attractive to repay fixed-rate mortgages).
Comprehensive definition of the term prepayment risk
Investors in the mortgage-backed securities will have to refinance at a lower interest rate.