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Breakage costs: Difference between revisions
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===[[Loan]]s=== | ===[[Loan]]s=== | ||
[[Breakage costs]], or [[break costs]], on a [[loan]] are the opportunity cost to a [[lender]] of a borrower repaying a loan before scheduled maturity, meaning the [[lender]] must [[unwind]] its [[interest rate]] [[hedge]]s - usually the difference between the rate payable on the loan for the specified period and the overnight rate. | [[Breakage costs]], or [[break costs]], on a [[loan]] are the opportunity cost to a [[lender]] of a borrower repaying a loan before scheduled maturity, meaning the [[lender]] must [[unwind]] its [[interest rate]] [[hedge]]s - usually the difference between the rate payable on the loan for the specified period and the overnight rate. | ||
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*[[Present value]] | *[[Present value]] | ||
{{ref}} | {{ref}} | ||