Glossary

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Extension Rate

Financial Term

Extension rate refers to the percentage of loans in a mortgage-backed security (MBS) that are not repaid on the maturity date. In other words, it is the proportion of mortgages in a pool that has extended past its original maturity date. The extension rate is a critical indicator used in the financial industry to evaluate the performance and the risks associated with mortgage-backed securities.

When purchasing an MBS, investors need to understand the probability of borrowers defaulting on their loans and the length of time it may take to recover their principal. The extension rate is used to measure the potential risk to repayments and the expected duration of an investment. Typically, the higher the extension rate, the greater the risk to investors, as it means that the borrower is failing to repay loans on time, and the length of time it may take to recover the investment is prolonged.

The extension rate also determines the yield of an MBS. As the length of time for the repayment of principal is extended, the yield on the MBS will decrease. This attribute makes MBS particularly sensitive to interest rate fluctuations. The potential decrease in yield when extension rates increase is a crucial factor in determining the valuation and pricing of MBS.

Extension rates are closely monitored by financial institutions and investors to assess the credit risk of mortgage-backed securities. By evaluating the extension rates of MBS, investors and financial institutions can gain insights into potential risks and make informed investment decisions.

More Glossary Terms Beginning with E

E-Commerce
The sale of goods and services where the buyer places an order, or the price and terms of the sale are negotiated over an Electronic Data Interchange, the Internet, or any other online system (extranet, e-mail, instant messaging). Payment may or may not be made online.

Economy Term Letter: E
Earned Premiums or Premiums Earned
That portion of property casualty premiums written that applies to the expired portion of the policy term. Earned premiums are recognized as revenues under both Statutory Accounting Practices (SAP) and GAAP.

Insurance Term Letter: E
Earnings per Share basic
The companys earnings divided by the average number of shares outstanding for the period. Statement of Income

Financial Term Letter: E
Earnings per Share diluted
The companys earnings divided by the average number of shares outstanding for the period, giving effect to assumed dilution from outstanding stock options and restricted stock units. Earnings per Share

Financial Term Letter: E
Earnings per Share EPS Growth Rates
The percentage of EPS change within a specific period (Y/Y year on year; Seq sequential, from proceeding period; TTM trailing twelve months).

Fundamental Analysis Letter: E
Effective Tax Rate
Provision for income taxes as a percentage of earnings from continuing operations before income taxes and accounting changes. Does not represent cash paid for income taxes in the current accounting period. Also referred to as "actual tax rate" or "tax rate."

Financial Term Letter: E
EITF
Emerging Issues Task Force

Financial Term Letter: E
Electro Optic Materials
Electro-optic materials are materials that are engineered at the molecular level. Molecular level engineering is commonly referred to as "nanotechnology."

Manufacturing Term Letter: E
Electrolysis
A process of separating bonded elements and compounds by passing an electric current through them.

Manufacturing Term Letter: E
Electrolytic Plant
A plant that processes purifying metal ingots that are suspended as anodes in an electrolytic bath, alternated with refined sheets of the same metal which act as starters or cathodes.

Manufacturing Term Letter: E
Eligible Bank
A bank selected by Seller and approved by Buyer in writing and authorized to conduct trust and other banking business in any state in which Seller conducts operations.

Financial Term Letter: E
Eligible Swap Counterparty
means an entity, which may be an affiliate of a remarketing agent, engaged in the business of entering into derivative instrument contracts that satisfies the Rating Agency Condition.

Financial Term Letter: E

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represents ownership in the shares of a non-U.S. company that trades in U.S. financial markets. ADRs enable U.S. investors to buy shares in foreign companies without the inconveniences of cross-border & cross-currency transactions. ADRs carry prices in US dollars, pay dividends in US dollars, and can be traded like the shares of US-based companies.

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ADS American Depositary Share
represents ownership in the shares of a non-U.S. company that trades in U.S. financial markets. American Depositary Share representing one underlying Ordinary Share. ADS enable U.S. investors to buy shares in foreign companies without the inconveniences of cross-border & cross-currency transactions. ADS carry prices in US dollars, pay dividends in US dollars, and can be traded like the shares of U

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AICPA
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Allowance For Credit Losses
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Allowance For Loan and Lease Losses
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Amortization
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