Extension Risk

Extension risk is the risk that principal is returned later than expected, often increasing duration when rates rise.

Why this matters to income investors

Slower repayment can lock capital into a lower-rate asset for longer.

How to use extension risk in your research

Check the contractual dates and any right to repay early. Compare the cash flow you expect with what could happen if principal returns sooner or later and must be reinvested at a different yield.

This material is general education and information, not individualized investment, tax, or legal advice.