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 ?
From the quick start link that opens, select the embedded option and then pick Linux*.
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.
In that case, the BCNs may not be considered readily convertible to cash and the embedded option would not qualify as net settled and, therefore, would not be a derivative.
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.
The project is expected to be reviewed for full approval in the fourth quarter of 2012 and has an embedded option to expand by a further 100 million mt/y.
This project has an embedded option to expand by another 100 million tons per year.
Of course, our pricing model does not allow for more sophisticated financial hypothesis, such as stochastic volatility or jumps in the fund process and term-structure effects, but as Milevsky and Salisbury (2006) we are confident that these considerations will only increases the price of the embedded option.
A dual axis design, expandable to 6 axes, with an embedded option for controlling bipolar stepper motors with currents of up to 2.
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.

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