Option risk: Difference between revisions
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imported>Doug Williamson (Create the page. Sources: linked pages.) |
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''Banking''. | ''Banking''. | ||
Banks' lending and deposit-taking relationships with their customers often give valuable options to the customers, as part of the relationship. | |||
For example, a customer's right to repay a fixed rate mortgage early. | For example, a customer's right to repay a fixed rate mortgage early. | ||
Option risk is the risk to the bank which arises from the possibility that the customers might exercise their rights of this kind, to the disadvantage of the bank. | |||
Revision as of 14:36, 2 November 2016
Banking.
Banks' lending and deposit-taking relationships with their customers often give valuable options to the customers, as part of the relationship.
For example, a customer's right to repay a fixed rate mortgage early.
Option risk is the risk to the bank which arises from the possibility that the customers might exercise their rights of this kind, to the disadvantage of the bank.
