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 lending of money by one or more individuals, organizations, or other entities to other individuals, organizations, etc. The recipient (i.e., the borrower) incurs a debt and is usually liable to pay interest on that d ...
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
Bond or bonds may refer to:
Common meanings
* Bond (finance), a type of debt security
* Bail bond, a commercial third-party guarantor of surety bonds in the United States
* Chemical bond, the attraction of atoms, ions or molecules to form chemica ...
or
term deposit, at which point the
principal (and all remaining
interest
In finance and economics, interest is payment from a borrower 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 ...
) 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
The yield to maturity (YTM), book yield or redemption yield of a bond or other fixed-interest security, such as gilts, is an estimate of the total rate of return anticipated to be earned by an investor who buys a bond at a given market price, ho ...
on those bonds increased.
See also
*
Deferred financing cost
*
Rolling (finance) Rolling a contract is an investment concept meaning trading out of a standard contract and then buying the contract with next longest maturity, so as to maintain a position with constant maturity.
Motivation
One may roll a contract because one has ...
*
Maturity transformation Maturity transformation is the practice by financial institutions of borrowing money on shorter timeframes than they lend money out. Financial markets also have the effect of maturity transformation whereby investors such as shareholders and bondhol ...
References
Loans
Swaps (finance)
Bond valuation
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