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🏁 Maturity Settlement

A maturity settlement event marks the end of a fixed-term financial instrument — the issuer returns the principal (face value) to the investor, and no further price calculations occur.

📖 Definition

Maturity is the date on which a debt instrument (bond, note, certificate of deposit, term loan) reaches its contractual end. On this date:

  1. The principal (face value / par value) is returned to the investor
  2. Any final interest payment is made (if applicable)
  3. The instrument ceases to exist — no further pricing or trading

Instruments with Maturity Dates

Instrument Typical Maturity Settlement
Treasury Bills 4 weeks – 1 year Par value at maturity
Government Bonds 2 – 30 years Par value + final coupon
Corporate Bonds 1 – 30 years Par value + final coupon
Certificates of Deposit 1 month – 5 years Principal + accrued interest
Term Deposits 1 month – 5 years Principal + interest
P2P Loans 1 – 5 years Remaining principal

📉 Impact on Market Price

As a bond approaches maturity, its market price converges toward the face value (par), regardless of whether it was trading at a premium or discount:

\[ \lim_{d \to \text{maturity}} P(d) = \text{Face Value} \]

This phenomenon is called pull to par:

  • Premium bonds (price > par): Price gradually decreases toward par
  • Discount bonds (price < par): Price gradually increases toward par

Example: Government Bond Maturity

A 10-year government bond with face value €1,000 and 3% annual coupon:

  • At issuance (2015): Price = €1,000 (par)
  • Mid-life (2020): Price = €1,050 (premium, because market rates dropped)
  • Near maturity (2024): Price = €1,005 (converging to par)
  • At maturity (2025-01-15): Investor receives:
    • €1,000 (face value return)
    • €30 (final annual coupon)
    • Total: €1,030

Example: Zero-Coupon Bond

A zero-coupon bond with face value $1,000 purchased at $850:

  • At purchase: Price = $850 (discount)
  • At maturity: Investor receives $1,000
  • Implied return: \(150 (\)1,000 − $850)
  • No interim interest payments — all return comes from the maturity settlement

📊 After Maturity

Once a maturity settlement event is recorded in LibreFolio:

  • The asset's price series ends at the maturity date
  • The settlement amount represents the final data point
  • The asset can remain in the system for historical analysis but won't receive new price data

🧮 How LibreFolio Handles Maturity Settlement

In LibreFolio, a MATURITY_SETTLEMENT event is recorded with:

  • Date: The maturity date
  • Amount: The face value / principal amount returned
  • Currency: The currency of settlement
  • Notes: Optional description (e.g., "10Y Treasury bond matured")

For the Scheduled Investment provider, the maturity date is configured in the provider settings. The price calculation formula recognizes that no further accrual occurs after maturity:

\[ \text{price}(d) = \begin{cases} \text{initial\\_value} + \text{accrued}(d) - \Sigma\text{INT} + \Sigma\text{ADJ} & \text{if } d < \text{maturity} \\ \text{settlement\\_amount} & \text{if } d \geq \text{maturity} \end{cases} \]