|Irrational call option|
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Definition of Irrational call option
Irrational call option
The implied call imbedded in the MBS. Identified as irrational because the call is
The option of terminating an investment earlier than originally planned.
The sum of cash, accounts receivable, and short-term marketable
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.
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
cash or nontaxable benefits
An option that gives the right to buy the underlying futures contract.
a. An option to buy a certain quantity of a stock or commodity for a
Call an option
To exercise a call option.
A date before maturity, specified at issuance, when the issuer of a bond may retire part of the bond
Call money rate
Also called the broker loan rate , the interest rate that banks charge brokers to finance
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.
The price, specified at issuance, at which the issuer of a bond may retire part of the bond at a
The price for which a bond can be repaid before maturity under a call provision.
A feature of some callable bonds that establishes an initial period when the bonds may not be
An embedded option granting a bond issuer the right to buy back all or part of the issue prior
The combination of cash flow uncertainty and reinvestment risk introduced by a call provision.
A swaption in which the buyer has the right to enter into a swap as a fixed-rate payer. The
A financial security such as a bond with a call option attached to it, i.e., the issuer has the right to
A bond that allows the issuer to buy back the bond at a
Bond that may be repurchased by the issuer before maturity at specified call price.
option on an option.
A short call option position in which the writer owns the number of shares of the underlying
Covered call writing strategy
A strategy that involves writing a call option on securities that the investor
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
A provision that prohibits the company from calling the bond before a certain date. During this
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.
when the incremental revenue from the sale of reworked defective units is greater than
Effective call price
The strike price in an optional redemption provision plus the accrued interest to the
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
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.
With CMOs, the start of the cash flow cycle for the cash flow window.
Foreign currency option
An option that conveys the right to buy or sell a specified amount of foreign
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.
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
The right of the homeowner to prepay, or call, the mortgage at any time.
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
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
A demand for additional funds because of adverse price movement. Maintenance margin
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.
Naked option strategies
An unhedged strategy making exclusive use of one of the following: Long call
net income (also called the bottom line, earnings, net earnings, and net
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.
Provisional call feature
A feature in a convertible issue that allows the issuer to call the issue during the noncall
Put an option
To exercise a put option.
Put-call parity relationship
The relationship between the price of a put and the price of a call on the same
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.
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