option risk

option risk

All American consumer mortgage loans give the borrower the option to pay the loan off early, usually because of a sale of the property or because the borrower decided to refinance. This is bad news for the investors who purchased that mortgage as part of a pool, because now the income stream they intended to purchase has ended. The investor's risk, that the prepayment option may be exercised and the income stopped, is called the option risk and sometimes the prepayment risk.

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He also designed and built a global FX option risk system for another bank.
Investors should also note that the risk factors titled "Put Option Risk," "Equity Risk" and "Implied Volatility Risk" concern the features of the Fund from which the Fund expects to derive its investment return.
However, most depository institutions have significant exposure to option risk embedded within many classes of financial assets and liabilities, which makes effective duration a more precise method when preparing the re-pricing gap analysis.
Exotics, Strategies, Greeks and Managing Option Risk in a Trading Book on March 18 is an advanced course that looks at tools for calculating risk positions and composite derivatives strategies.
6 percent and receiving something less than 60 basis points net of taxes for the short option risk.
A fee is not necessarily the way to go, yet it is an option risk managers should be aware of," remarked Karen Miller, risk manager of LSI Logic Corp.
Additionally, equity option traders and risk managers can now analyse and automatically manage their risk exposure using an included option risk management module.
Part 4: Further Topics Option Pricing Option Risk Management CDS Pricing and Credit Risk Management.
Volatility ratings, which range from lowest volatility ('S1', with certain funds designated with a plus sign (+) to indicate the fund's extremely low sensitivity to changing market conditions) to highest volatility ('S6'), are based on an analysis of a fund's investment strategy and portfolio level risk, including interest-rate risk, credit quality, liquidity, concentration, call and option risk, and currency risk.
Module 3: Introduction to the Options Markets Preface Overview of options Option pay-off profile Types of options Option trading strategies Option risk Case study: market makers Answers to exercises
The option risk measurements, focusing on the most active options contracts, display real-time market options prices with their underlying futures prices and corresponding implied volatility.
In a step-by-step fashion, making extensive use of real world cases and examples, it explains money markets, foreign exchange, bond markets, cash equity markets, equity valuation techniques, swaps, forwards, futures, credit derivatives, options, option risk management and convertible bonds.