Filter by Categories
Accounting
Banking

Derivatives




Path-Independent Option


An option whose payoff depends solely on the events specified to take place upon expiration, rather than the path taken by the underlying variable (price, rate, index, etc). A prime example is a European option where the price for the buyer depends exclusively on the terminal price. If an investor buys a call option with a strike price of USD 50, he would benefit if the underlying rises above 50 upon expiration. If not, he would not exercise and the premium paid to buy the option is lost. It is irrelevant which route the underlying price (the sport price of the option’s underlying asset) takes within time to expiration.

This option, opposite of path-dependent option, is also referred to as non-path-dependent option.



ABC
Derivatives have increasingly become very important tools in finance over the last three decades. Many different types of derivatives are now traded actively on ...
Watch on Youtube
Remember to read our privacy policy before submission of your comments or any suggestions. Please keep comments relevant, respectful, and as much concise as possible. By commenting you are required to follow our community guidelines.

Comments


    Leave Your Comment

    Your email address will not be published.*