Premium

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1. Options.

The amount payable by the buyer of an option to the option writer for the right to deal on the terms contained in the option.


2. Insurance.

The amount payable by an insured to the insurer in return for the protection set out in the terms of the insurance policy.


3. Bonds.

A bond trading in the market at a premium has a market value greater than its par value.


4. Foreign currency.

A foreign currency trading at a premium in the forward foreign exchange market is stronger in the forward market, than in the spot market.


5. Product & service quality.

Higher-quality, in relation to a product or service.

The premium quality is normally reflected in higher pricing or other additional costs.


6. Price reflecting benefits.

An additional amount within a purchase price, reflecting additional benefits.

For example, a control premium in valuing a company.


7. Price reflecting market conditions.

An additional amount within a purchase price, reflecting market conditions such as an increase in demand.


Warehousing space at a premium
"... if a logistics business saw reducing its warehousing capacity as a way to reduce costs in March 2020, it may have regretted that decision as internet volumes – which require large amounts of warehousing capacity – soared during the year, and as the world opens up, warehousing space is now at a premium.
The message is: preserve cash to meet an objective, not just for the sake of it in itself."
Gary Slawther, interim group treasurer - The Treasurer, Issue 2, June 2021, p37


8. Investment returns.

Additional return required or expected by investors in certain assets.

For example, a term premium on longer maturity bonds.


9. Equity - rights issues - lapsed rights.

Any excess of the price that shares relating to lapsed rights are sold for, over the rights issue offer price.


Compensation for lapsed rights
"Any premium over the offer price obtained in the market will be paid (net of expenses) to the shareholder who was originally offered, but declined, the new shares or to the person to whom that shareholder renounced his/her rights."
An introduction to equity capital - the Treasurer's Wiki.


See also

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