In finance, maturity or maturity date is the date on which the final payment is due on a
loan
In finance, a loan is the tender of money by one party to another with an agreement to pay it back. The recipient, or borrower, incurs a debt and is usually required to pay interest for the use of the money.
The document evidencing the deb ...
or other
financial instrument
Financial instruments are monetary contracts between parties. They can be created, traded, modified and settled. They can be cash (currency), evidence of an ownership, interest in an entity or a contractual right to receive or deliver in the form ...
, such as a
bond or
term deposit, at which point the
principal (and all remaining
interest
In finance and economics, interest is payment from a debtor or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum (that is, the amount borrowed), at a particular rate. It is distinct f ...
) is due to be paid.
Most instruments have a ''fixed maturity date'' which is a specific date on which the instrument matures. Such instruments include fixed interest and variable rate loans or debt instruments, however called, and other forms of security such as redeemable preference shares, provided their terms of issue specify a maturity date. It is similar in meaning to "redemption date".
Some instruments have ''no fixed maturity date'' which continue indefinitely (unless repayment is agreed between the borrower and the lenders at some point) and may be known as "perpetual stocks". Some instruments have a range of possible maturity dates, and such stocks can usually be repaid at any time within that range, as chosen by the borrower.
A ''serial maturity'' is when bonds are all issued at the same time but are divided into different classes with different, staggered redemption dates.
In the financial press, the term "maturity" is sometimes used as shorthand for the security itself, for example, ''In the market today the yields on ten-year maturities increased'' means the prices of bonds due to mature in ten years fell, and thus the
redemption yield on those bonds increased.
See also
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Deferred financing cost
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Rolling (finance) Rolling a contract is an investment concept meaning trading out of a contract and then buying the contract with next longest maturity (finance), maturity, so as to maintain a position with constant maturity.
Motivation
One may roll a contract becau ...
*
Maturity transformation
References
Loans
Swaps (finance)
Bond valuation
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