An embedded option is a component of a financial bond or other security, and usually provides the bondholder or the issuer the right to take some action against the other party. There are several types of options that can be embedded into a bond.

Hughes Optioneering

Some common types of bonds with embedded options include callable bond , puttable bond , convertible bond , extendible bond , exchangeable bond , and capped floating rate note. A bond may have several options embedded if they are not mutually exclusive.

Securities other than bonds that may have embedded options include senior equity, convertible preferred stock and exchangeable preferred stock. The valuation of these securities combines bond- or equity-valuation , as appropriate, with option pricing.

Bond option - Wikipedia

For bonds here, there are two main approaches: Once the price has been calculated, the various yields can then be calculated for the security. Other securities with embedded derivatives are priced similarly. From Wikipedia, the free encyclopedia.

Bond Debenture Fixed income.

Agency bond Corporate bond Senior debt Subordinated debt Distressed debt Emerging market debt Government bond Municipal bond. Accrual bond Auction rate security Callable bond Commercial paper Contingent convertible bond Convertible bond Exchangeable bond Extendible bond Fixed rate bond Floating rate note High-yield debt Inflation-indexed bond Inverse floating rate note Perpetual bond Puttable bond Reverse convertible securities Zero-coupon bond.

Clean price Convexity Coupon Credit spread Current yield Dirty price Duration I-spread Mortgage yield Nominal yield Option-adjusted spread Risk-free bond Weighted-average life Yield curve Yield spread Yield to maturity Z-spread. Asset-backed security Collateralized debt obligation Collateralized mortgage obligation Commercial mortgage-backed security Mortgage-backed security. Callable bond Convertible bond Embedded option Exchangeable bond Extendible bond Puttable bond.

Commercial Mortgage Securities Association CMSA International Capital Market Association ICMA Securities Industry and Financial Markets Association SIFMA.

Retrieved from " https: Fixed income analysis Commercial bonds Investment stubs. Articles lacking sources from September All articles lacking sources All stub articles.

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Guide To Embedded Options In Bonds | Investopedia

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