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Definition of Swap optio
Also called the swap option, the seller's choice of deliverables in Treasury Bond and Treasury
A swap option; an option on an interest-rate swap. The option gives
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
swap in which the principal or national amount rises (falls) as interest rates
Yield curve option-pricing models.
option based on the average price of the asset during the life of the option.
Creditors exchange the debt of one defaulting borrower for the debt of another
An interest rate swap used to alter the cash flow characteristics of an institution's assets so as to
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
Black-Scholes option-pricing model
A model for pricing call options based on arbitrage arguments that uses
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.
A swaption in which the buyer has the right to enter into a swap as a fixed-rate payer. The
A fixed rate currency swap against floating U.S. dollar LIBOR payments.
option on an option.
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.
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
A set of transactions (also called a debt-equity swap) in which a firm buys a country's dollar bank
The options available to the seller of an interest rate futures contract, including the quality
swap between two LIBO rates of interest, e.g. yen LIBOR for dollar LIBOR. Payments are
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
A swap in which the cash flows that are exchanged are based on the total return on some stock
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.
Extending maturity through a swap, e.g. selling a 2-year note and buying one with a slightly
Foreign currency option
An option that conveys the right to buy or sell a specified amount of foreign
Foreign exchange swap
An agreement to exchange stipulated amounts of one currency for another currency
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
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.
Interest rate swap
A binding agreement between counterparties to exchange periodic interest payments on
Intermarket spread swaps
An exchange of one bond for another based on the manager's projection of a
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
An interest rate swap used to alter the cash flow characteristics of an institution's liabilities so
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.
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.
Pure yield pickup swap
Moving to higher yield bonds.
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.
A financial tool in which the buyer has the right, or option, to enter into a swap as a floatingrate
See: differential swap.
Rate anticipation swaps
An exchange of bonds in a portfolio for new bonds that will achieve the target
options embedded in real assets.
An option on an option. The buyer generally executes the split fee with first an initial fee,
Stock index option
An option in which the underlying is a common stock index.
An option in which the underlying is the common stock of a corporation.
a right allowing the holder to purchase shares of common stock during some future time frame and at a specified price
A right to purchase a specific maximum number of shares at a specific
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