We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in market prices. Our market risk exposure primarily relates to fluctuations in credit risk. We are exposed to market risk directly through investments in loans and securities held on our unaudited condensed consolidated balance sheets and access to the securitization markets. Credit Risk Credit risk refers to the risk of loss arising from individual borrower default due to inability or unwillingness to meet their financial obligations. The performance of certain financial instruments, including investments in loans, securitization notes and residual certificates on our unaudited condensed consolidated balance sheets, is dependent on the credit performance. To manage this risk, we monitor borrower payment performance and utilize our proprietary, AI-powered technology to evaluate individual loans in a manner that we believe is reflective of the credit risk. The fair values of these loans, securitization notes, and residual certificates are estimated based on a discounted cash flow model which involves the use of significant unobservable inputs and assumptions, the most significant of which is expected credit losses. Accordingly, these instruments are sensitive to changes in credit risk. As of June 30, 2026 and December 31, 2025, we were exposed to credit risk on $1,040 million and $945 million, respectively, of investments in loans and securities held on our 47 Table of Contents unaudited condensed consolidated balance sheets, with $986 million and $871 million, respectively, representing net exposure exclusive of non-controlling interests. We monitor our portfolio risk through internal monitoring as well as competitor and market assessments, reviewing macro-economic trends, and associated stress testing. Loans and related risk retention securities are monitored throughout the entire lifecycle. This risk monitoring framework provides timely and actionable feedback on managing credit risk exposures. The following table summarizes the potential effect that changes in estimates would have on the fair value of our investments in loans and securities as of June 30, 2026 given a hypothetical change in significant unobservable inputs (in millions): Change in Fair Value Basis point change scenario June 30, 2026 Credit loss rate increase of 100 basis points $ (117.0) Credit loss rate decrease of 100 basis points $ 133.1 These scenarios illustrate a hypothetical, instantaneous shift in the value of our investments in loans and securities and do not represent management's performance expectations. As of June 30, 2026, our portfolio is comprised of 49% ABS securitization notes and 50% ABS residual certificates. Of the current portfolio of investments, 29% was originated in 2026, 36% in 2025, 20% in 2024 and 15% in 2023 and prior. We would normally expect more seasoned vintages and more senior investments to be less impacted by changes in credit loss rates. To manage this risk, management integrates these sensitivities into our continuous portfolio monitoring and stress-testing framework, ensuring our operations and capital structure remains resilient to such fluctuations. We are also exposed to credit risk in the event of non-performance by the financial institutions holding our cash or providing access to our credit line. We maintain our cash deposits in highly-rated financial institutions. In the United States, the majority of our cash deposits are held at federally insured accounts. We manage this risk by maintaining our cash deposits at well-established, well-capitalized financial institutions and diversifying our counterparties. Discount Rate Risk The discount rate risk refers to the risk of loss of future earnings, values or future cash flows that may result from changes in market discount rates. The fair values of loans, securitization notes, and residual certificates are estimated based on a discounted cash flow model, where the discount rate represents an estimate of the required rate of return by market participants. The changes in the discount rates reflect the expected returns of similar financial instruments available in the market and can be caused by changes in the interest rates. The following table summarizes the potential effect that changes in estimates would have on the fair value of our investments in loans and securities as of June 30, 2026 given a hypothetical change in significant unobservable inputs (in millions): Change in Fair Value Basis point change scenario June 30, 2026 Discount rate increase of 100 basis points $ (8.5) Discount rate decrease of 100 basis points $ 8.8 These scenarios illustrate potential market shifts rather than internal forecasts. While changes in market discount rates, reflecting the required rate of return for market participants—can influence the estimated fair value of our loans and securitization notes and residual certificates, management incorporates these hypothetical fluctuations into our proactive capital allocation and deal execution strategies. This modeling ensures we maintain operational stability and consistent access to funding across varying market conditions. Interest Rate Risk The interest rates charged on the loans originated by Partners are subject to change by the platform sellers, originators, and/or servicers. Higher interest rates could negatively impact collections on the underlying loans, leading to increased delinquencies, defaults, and our borrowers’ bankruptcies, all of which could have a substantial adverse effect on our business. This would also impact future loans and securitizations. 48 Table of Contents Additionally, we maintain certain financing sources with varying degrees of interest rate sensitivities, including floating-rate interest payments on Pagaya’s credit facilities. Accordingly, trends in the prevailing interest rate environment can influence interest expense and payments and adversely affect our results of our operations. For additional information, see “Item 2. Liquidity and Capital Resources”. We also rely on securitization transactions, with notes of those transactions typically bearing a fixed coupon. For future securitization issuances, higher interest rates could affect overall deal economics as well as the returns we would generate on our related risk retention investments and discretionary investments. Foreign Exchange Risk Foreign currency exchange rates do not pose a material market risk exposure. However, given the compensation and non-compensation expenses denominated in NIS, our inability or failure to manage foreign exchange risk could adversely affect our results of operations.