Derivatives
Zero Coupon Swaption
August 6, 2020
Derivatives
Tom Next
August 6, 2020

cash-settled European call option whose exercise price is zero or very close to zero. Since its being exercised is almost certain, this option replicates a long position taken in the underlying asset without any right in its proceeds (dividends or interest payments) up to expiration date.

This type of option is typically instrumental to overcome restrictions imposed by governments in terms of the transfer of securities (transfer tax, ownership restriction, etc).

Leave a Reply

Your email address will not be published. Required fields are marked *

Related Posts