guarantee letter(redirected from Guarantee Letters)
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
In put options, a guarantee of delivery of securities made by a bank to a brokerage on behalf of the bank's client. When an investor is writing a put option and does not have the cash available to buy the underlying asset if the option is exercised, the brokerage may require a guarantee letter in order to eliminate the risk that the investor will not be able to buy the underlying asset. See also: Cosigner, Letter of guarantee.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
A letter that is issued by a commercial bank guaranteeing that an investor who is writing a put option will pay the required sum in the event that the put is exercised against the investor.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.