An option in which payment of the premium is deferred until the its expiration date. This option is a type of an American option. In general, the deferred payment option is a long-term investment due to the fact that the expiration date and the premium payment are generally a year after the date the contract is initially concluded.
This option was introduced for the first time by the Bank of Boston in 1985 in order to help firms unable to make the required upfront premium payment.
It is also known as Boston option or pay-later option.
