|Intrinsic value of an option|
Information about financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit.
Main Page: business, payroll, tax advisor, financial advisor, financial, inventory control, investment, credit,
Also see related: homes, homebuying, buy home, home buyer, condo, homebuyer, credit, home, first time homebuyer,
Definition of Intrinsic value of an option
Intrinsic value of an option
The amount by which an option is in-the-money. An option which is not in-themoney
Same as PV, but usually includes a subtraction for an initial cash outlay.
the value in today’s dollars of cash flows that occur in different time periods.
The option of terminating an investment earlier than originally planned.
The net present value analysis of an asset if financed solely by equity
An option that may be exercised at any time up to and including the expiration date.
An option contract that can be exercised at any time between the date of purchase and
Yield curve option-pricing models.
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
An option pricing model in which the underlying asset can take on only two
A model for pricing call options based on arbitrage arguments that uses
With respect to convertible bonds, the value the security would have if it were not convertible
A company's book value is its total assets minus intangible assets and liabilities, such as debt. A
Book value per share
The ratio of stockholder equity to the average number of common shares. Book value
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
An amount the insurance company will pay if the policyholder ends a whole life
option on an option.
Also called parity value, the value of a convertible security if it is converted immediately.
Covered or hedge option strategies
Strategies that involve a position in an option as well as a position in the
An option to buy or sell a foreign 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
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.
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
option that may be exercised only at the expiration date. Related: american option.
An option contract that can only be exercised on the expiration date.
The amount of advantage over a current market transaction provided by an in-the-money
Exercising the option
The act buying or selling the underlying asset via the option contract.
The weighted average of a probability distribution.
Expected value of perfect information
The expected value if the future uncertain outcomes could be known
Extraordinary positive value
A positive net present value.
See: Par value.
Firm's net value of debt
Total firm value minus total firm debt.
Foreign currency option
An option that conveys the right to buy or sell a specified amount of foreign
The amount of cash at a specified date in the future that is equivalent in value to a specified
An option on a futures contract. Related: options on physicals.
Garmen-Kohlhagen option pricing model
A widely used model for pricing foreign currency options.
option that allows the underwriter for a new issue to buy and resell additional shares.
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.
Intrinsic value of a firm
The present value of a firm's expected future net cash flows discounted by the
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
Net amount that could be realized by selling the assets of a firm after paying the debt.
The amount a policyholder may borrow against a whole life insurance policy at the interest rate
An option that allows the buyer to choose as the option strike price any price of the
Liquid yield option note (LYON)
Zero-coupon, callable, putable, convertible bond invented by Merrill Lynch & Co.
Margin requirement (Options)
The amount of cash an uncovered (naked) option writer is required to
1) The price at which a security is trading and could presumably be purchased or sold.
Market value ratios
Ratios that relate the market price of the firm's common stock to selected financial
Market value-weighted index
An index of a group of securities computed by calculating a weighted average
Related: par value.
Multi-option financing facility
A syndicated confirmed credit line with attached options.
Naked option strategies
An unhedged strategy making exclusive use of one of the following: Long call
Net adjusted present value
The adjusted present value minus the initial cost of an investment.
Net asset value (NAV)
The value of a fund's investments. For a mutual fund, the net asset value per share
Net book value
The current book value of an asset or liability; that is, its original book value net of any
Net present value (NPV)
The present value of the expected future cash flows minus the cost.
Net present value of growth opportunities
A model valuing a firm in which net present value of new
Net present value of future investments
The present value of the total sum of NPVs expected to result from
Net present value rule
An investment is worth making if it has a positive NPV. Projects with negative NPVs
Net salvage value
The after-tax net cash flow for terminating the project.
Gives the buyer the right, but not the obligation, to buy or sell an asset at a set price on or before a
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
Option-adjusted spread (OAS)
1) The spread over an issuer's spot rate curve, developed as a measure of
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
Original face value
The principal amount of the mortgage as of its issue date.
A call option is out-of-the-money if the strike price is greater than the market price
Also called the maturity value or face value, the amount that the issuer agrees to pay at the maturity date.
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.
The amount of cash today that is equivalent in value to a payment, or to a stream of payments,
Present value factor
Factor used to calculate an estimate of the present value of an amount to be received in
Present value of growth opportunities (NPV)
Net present value of investments the firm is expected to make
Price value of a basis point (PVBP)
Also called the dollar value of a basis point, a measure of the change in
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
Also called the swap option, the seller's choice of deliverables in Treasury Bond and Treasury
The attractiveness measured in terms of risk, liquidity, and return of one instrument relative to
Current cost of replacing the firm's assets.
Usually refers to the value of a lessor's property at the time the lease expires.
Scrap value of plant and equipment.
Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit.