Description: Maturity risk refers to the uncertainty and potential loss associated with the time remaining until a financial instrument, such as a loan, bond, or derivatives contract, reaches its maturity date. This risk is crucial in the financial realm, as the value of an asset can fluctuate significantly as it approaches its maturity. As the time to maturity decreases, the sensitivity of the asset’s price to changes in interest rates or market conditions may increase, potentially resulting in unexpected losses for investors. In the context of decentralized finance (DeFi), maturity risk becomes even more relevant, given that many financial products in this space, such as loans and smart contracts, are designed to operate within a specific time frame. Therefore, participants must carefully assess maturity risk when interacting with these instruments, considering factors such as market volatility, liquidity, and overall economic conditions. Proper management of this risk is essential to maximize returns and minimize losses in a financial environment that can be highly volatile and dynamic.
