Derivatives
Contingent Premium Floor
January 31, 2022
Islamic Finance
Zakat al-Mutarabbis
January 31, 2022

The premium (price) of an option contract whose payment is deferred to expiration and is contingent on the option expiring in the money. No premium is paid if the option expires worthless, i.e., is at the money or out of the money at expiration. Everything else being equal, the contingent premium usually exceeds an ordinary premium. Options with contingent premium are essentially European-style.

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