Price-Based Option

Price-Based Option

A derivative financial instrument in which the underlying asset is a debt security. Typically, these options give their holders the right to purchase or sell an underlying debt security (usually a bond) or to receive cash payment based on the current value of the underlying debt security.

Notes:

This unique type of option has been traded in the past, but is not currently traded in modern financial markets. A close relative of the price-based option, the yield-based option, has been more commonly traded.

See also: Bond, Bond Option, Derivative, Option, Underlying, Yield-Based Option