Refinancing risk

Refinancing risk

In banking and finance, "refinancing risk" is the possibility that a borrower cannot refinance by borrowing to repay existing debt. Many types of commercial lending incorporate bullet payments at the point of final maturity; often, the intention or assumption is that the borrower take out a new loan to pay the existing lenders.

A borrower that cannot refinance its existing debt and does not have sufficient funds on hand to pay its lenders may have a liquidity problem. It may be considered technically insolvent: although its assets are greater than its liabilities, it cannot raise the liquid funds to pay its creditors. Insolvency may lead to bankruptcy, despite the fact that the company has a positive net worth.

Most large corporations and banks face this risk to some degree, as they may constantly borrow and repay loans. In general, refinancing risk is only considered to be substantial in cases of financial crisis, when borrowing funds may be extremely difficult.

Refinancing is also known as "rolling over" debt of various maturities, and may be referred to as rollover risk.


Wikimedia Foundation. 2010.

Игры ⚽ Нужно решить контрольную?

Look at other dictionaries:

  • Refinancing Risk — 1. The risk that an early unscheduled repayment of principal on mortgage backed securities(MBS) will occur when the underlying mortgages are refinanced by borrowers. All MBS buyers assume some level of prepayments in their initial yield… …   Investment dictionary

  • Refinancing — may refer to the replacement of an existing debt obligation with a debt obligation under different terms. The terms and conditions of refinancing may vary widely by country, province, or state, based on several economic factors such as, inherent… …   Wikipedia

  • Credit risk — Categories of financial risk Credit risk Concentration risk Market risk Interest rate risk Currency risk Equity risk Commodity risk Liquidity risk Refinancing risk …   Wikipedia

  • Operational risk — Categories of financial risk Credit risk Concentration risk Market risk Interest rate risk Currency risk Equity risk Commodity risk Liquidity risk Refinancing risk …   Wikipedia

  • Market risk — Categories of financial risk Credit risk Concentration risk Market risk Interest rate risk Currency risk Equity risk Commodity risk Liquidity risk Refinancing risk …   Wikipedia

  • Currency risk — Categories of financial risk Credit risk Concentration risk Market risk Interest rate risk Currency risk Equity risk Commodity risk Liquidity risk Refinancing risk …   Wikipedia

  • Commodity risk — Categories of financial risk Credit risk Concentration risk Market risk Interest rate risk Currency risk Equity risk Commodity risk Liquidity risk Refinancing risk …   Wikipedia

  • Concentration risk — Categories of financial risk Credit risk Concentration risk Market risk Interest rate risk Currency risk Equity risk Commodity risk Liquidity risk Refinancing risk …   Wikipedia

  • Operational risk management — See also: Risk management The term Operational Risk Management (ORM) is defined as a continual cyclic process which includes risk assessment, risk decision making, and implementation of risk controls, which results in acceptance, mitigation, or… …   Wikipedia

  • Extension Risk — The risk of a security s expected maturity lengthening in duration due to the deceleration of prepayments. Extension risk is mainly the result of rising interest rates, and is generally associated with mortgage related securities. The opposite of …   Investment dictionary

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”