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Definition of Currency option
An option to buy or sell a foreign currency.
An option that conveys the right to buy or sell a specified amount of foreign
A new option contract introduced by the PHLX in 1994 that is settled in US$ rather
A widely used model for pricing foreign currency options.
A securities exchange where American and European foreign
currency options with a guaranteed exchange rate that enable buyers who like the asset, German
The option of terminating an investment earlier than originally planned.
An option that may be exercised at any time up to and including the expiration date.
An option that can be exercised any time until its
An option contract that can be exercised at any time between the date of purchase and
Yield curve option-pricing models.
Dollar deposits held in Singapore or other Asian centers.
option based on the average price of the asset during the life of the option.
Gives the lessee the option to purchase the asset at a price below fair market
Contracts with trigger points that, when crossed, automatically generate buying or selling of
Packages that involve the exchange of more than two currencies against a base currency at
Binomial option pricing model
An option pricing model in which the underlying asset can take on only two
Black-Scholes option-pricing model
A model for pricing call options based on arbitrage arguments that uses
A currency that is not freely convertible to other currencies due to exchange controls.
cafeteria plan a “menu” of fringe benefit options that include
cash or nontaxable benefits
Call an option
To exercise a call option.
An option contract that gives its holder the right (but not the obligation) to purchase a specified
A contract that gives the holder the right to buy an asset for a
Right to buy an asset at a specified exercise price on or before the exercise date.
option on an option.
Covered or hedge option strategies
Strategies that involve a position in an option as well as a position in the
Taking advantage of divergences in exchange rates in different money markets by
The value of a portfolio of specific amounts of individual currencies, used as the basis for
A financial future contract for the delivery of a specified foreign currency.
Related: Exchange rate risk
Currency risk sharing
An agreement by the parties to a transaction to share the currency risk associated with
Asset allocation in which the investor chooses among investments denominated in
An agreement to swap a series of specified payment obligations denominated in one currency
Over-the-counter options, such as those offered by government and mortgage-backed
The options available to the seller of an interest rate futures contract, including the quality
Devaluation A decrease in the spot price of the currency
A sinking fund provision that may allow repurchase of twice the required number of bonds
Barrier option that comes into existence if asset price hits a barrier.
Barrier option that expires if asset price hits a barrier.
Eurobonds that pay coupon interest in one currency but pay the principal in a different
Elasticity of an option
Percentage change in the value of an option given a 1% change in the value of the
An option that is part of the structure of a bond that provides either the bondholder or
Securities that give the holder the right to buy or sell a specified number of shares of stock, at
Escalating Price Option
A nonqualified stock option that uses a sliding scale for
A short-term fixed rate time deposit denominated in a currency other than the local
The money market for borrowing and lending currencies that are held in the form of
European Currency Unit (ECU)
An index of foreign exchange consisting of about 10 European currencies,
option that may be exercised only at the expiration date. Related: american option.
An option that can be exercised only on its expiration date.
An option contract that can only be exercised on the expiration date.
Exercising the option
The act buying or selling the underlying asset via the option contract.
A variety of options available to an investor to recover their invested capital and the return on their investment.
Foreign currency translation
The process of restating foreign currency accounts of subsidiaries into the
An option on a futures contract. Related: options on physicals.
option that allows the underwriter for a new issue to buy and resell additional shares.
A freely convertible currency that is not expected to depreciate in value in the foreseeable future.
Heavenly Parachute Stock Option
A nonqualified stock option that allows a deceased option holder’s estate up to three years in which to exercise his or her
Incentive Stock Option
An option to purchase company stock that is not taxable
Index and Option Market (IOM)
A division of the CME established in 1982 for trading stock index
A call or put option based on a stock market index.
One of several investment accounts in which your premiums may be invested within your life insurance policy.
Intrinsic value of an option
The amount by which an option is in-the-money. An option which is not in-themoney
Irrational call option
The implied call imbedded in the MBS. Identified as irrational because the call is
Liquid yield option note (LYON)
Zero-coupon, callable, putable, convertible bond invented by Merrill
Liquid yield option note (LYON)
Zero-coupon, callable, putable, convertible bond invented by Merrill Lynch & Co.
An option that allows the buyer to choose as the option strike price any price of the
Margin requirement (Options)
The amount of cash an uncovered (naked) option writer is required to
Multi-option financing facility
A syndicated confirmed credit line with attached options.
Such a clause on a Euro loan permits the borrower to switch from one currency to
Give the borrower the possibility of drawing a loan in different currencies.
Naked option strategies
An unhedged strategy making exclusive use of one of the following: Long call
Nonqualified Stock Option
A stock option not given any favorable tax treatment
Gives the buyer the right, but not the obligation, to buy or sell an asset at a set price on or before a
See call option and put option
A right to buy or sell specific securities or commodities at a stated
Right to buy or sell a specified property at a specified amount at some time in the future.
Option-adjusted spread (OAS)
1) The spread over an issuer's spot rate curve, developed as a measure of
The percentage increase in an option's value given a 1% change in the value of the
Option not to deliver
In the mortgage pipeline, an additional hedge placed in tandem with the forward or
The option price.
Also called the option premium, the price paid by the buyer of the options contract for the right
Also called the option writer , the party who grants a right to trade a security at a given price in
A contract that, in exchange for the option price, gives the option buyer the right, but not
Options contract multiple
A constant, set at $100, which when multiplied by the cash index value gives the
Options on physicals
Interest rate options written on fixed-income securities, as opposed to those written on
A call option is out-of-the-money if the strike price is greater than the market price
Path dependent option
An option whose value depends on the sequence of prices of the underlying asset
The option of postponing a project without eliminating the possibility of undertaking it.
Put an option
To exercise a put option.
This security gives investors the right to sell (or put) fixed number of shares at a fixed price within
A contract that gives the holder the right to sell an asset for a
Right to sell an asset at a specified exercise price on or before the exercise date.
Contract that grants the right to sell at a specified price at some time in the future.
Also called the swap option, the seller's choice of deliverables in Treasury Bond and Treasury
options embedded in real assets.
The currency in which the parent firm prepares its own financial statements; that is, U.S.
A foreign currency held by a central bank or monetary authority for the purposes of
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