Expiration

economic-dictionary

Maturity is the deadline in which a contractual obligation must be fulfilled.

In finance, the concept of maturity is usually accompanied by two names: term and date. So on the one hand we have the expiration period and on the other the expiration date.

The expiration period is the number of days, weeks, months or years that must pass for the contract to end, become effective and, consequently, the obligation or right ends. Meanwhile, the expiration date is the exact day and time that said term ends.

Obligation to pay

Normally, except in extreme cases, debt payment problems come to maturity. Coupons are usually paid out periodically, but the principal is returned at the end. Thus, when you really see the debtor's problems is when you have to pay.

It should be noted that the creditor cannot claim his debt in court until the expiration period has passed. That is, if the deadline has not been returned, it can and should demand that the money be returned. In the event that the debtor does not pay or cannot pay, the necessary legal procedures will be carried out. The latter is due to the fact that a debtor does not acquire the condition of defaulter until the period in which the obligation must be consummated expires.

We must also mention that it does not have to be a debt per se, for there to be a maturity. In the definition we have dictated the following: «… deadline in which a contractual obligation must be fulfilled». So this deadline could also apply to other payment obligations such as invoices.

Maturity and financial products

The financial product in which the concept is perhaps most popular is that in the debt market. The bonds, bills, obligations or promissory notes have a maturity period. For example, bonds tend to have between 2 and 7 years to mature, obligations from 10 years and bills of less than or equal to 18 months. This, it must be said, depends on the country since it is to name things. After all, all these instruments are debt.

On the other hand, the instruments in which the expiration period is also present and, more insistently, its date, are futures and financial options. They usually have a maturity period of 3 months, although this will depend on each particular market.

Tags:  Spain Argentina right 

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