embedded option

Embedded option

An option that is part of the structure of a bond that gives either the bondholder or the issuer the right to take some action against the other party, as opposed to a bare option, which trades separately from any underlying security.

Embedded Option

An option or other special provision attached to a bond. For example, an embedded option in a convertible bond is the ability of the bondholder to exchange the bond for shares in the underlying common stock. Likewise, an embedded option may enable the issuer to call a callable bond before maturity. It differs from a bare option, which is the trading of a standalone security separately from any bond.

embedded option

A provision within a security giving either the issuer or the security holder the right to take a specified action against the other. For example, a call provision is an embedded option in a bond that gives the issuer the right to redeem the bond prior to the scheduled maturity.
References in periodicals archive ?
Option Adjusted Spread (OAS) refers to a measurement of the spread of a fixed-income security asset and the risk-free rate of return, which is adjusted to take into account an embedded option.
Therefore, ICBC developed a series of innovative products including fixed interest rate, floating interest rate, embedded option, product segmentation and credit enhancement to facilitate the growth of key sectors in the real economy, such as national key projects, projects related to public interest as well as small and micro enterprises.
With these parameter estimates in hand, we use the Hull-White model to compute the option-adjusted duration for each bond with an embedded option and generate the model-implied price and duration for the option-free bonds with missing price data.
This project has an embedded option to expand by another 100 million tons per year.
One example of an embedded option is a call provision, which allows the issuer to buy a bond back at a previously set price.
Versona's embedded option, a software-only voice biometric based on an open API for native mobile operating systems, was created to provide an ideal platform and can be pre-loaded and shipped with a handset or downloaded OTA directly to a device.
If the sponsor's share price rises, options behave more like the underlying stock, rising and falling in value in tandem with the shares, prompting managers to become more risk averse and more desirous to preserve an embedded option gain.
Consumer behavior suggests that, in addition to service and a put option, the initial payments provide an embedded option to convert the rental agreement to an installment contract at the end of an initial period at a competitive interest rate.
Cedar will now provide Compudigm's new seePOWER visualisation tool as an embedded option within Content Value Management (CVM), its own suite of knowledge management products designed to bring together information on topics of particular importance to an individual user or a team.
In addition, the RICOH MP C6502/MP C8002 series also provides powerful Optical Character Recognition (OCR) as a new embedded option with support for an industry-leading 14 languages that turns scanned documents into searchable PDFs for advanced indexing and retrieval.
Each type of connectivity is available as an embedded option, freeing up one PCI-E slot for a high-performance video card, GPU accelerator, additional I/O interconnectivity, flash storage or to support other application requirements.
Also, the embedded option value is given although one obviously cannot observe this.

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