Put option and Sweetheart deal: Difference between pages

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1.
1. ''Tax''.


An option which gives the holder the right to <u>sell</u> a specified quantity of a physical underlying asset, such as a commodity, at the strike price specified by the option. The holder will only exercise the option if it is beneficial for the holder to do so, based on the difference between the strike price and the price of the underlying asset at the maturity of the option.
A tax arrangement which is unusually favourable for the taxpayer.




2.
2. ''Tax''.


A similar option over a non-physical underlying asset.
The settlement of a tax dispute on terms which are unusually favourable for the taxpayer.




__NOTOC__
3.
==== Cash settlement ====
In practice many options are cash-settled by a payment, if relevant, by the writer (or seller) of the option to the holder, at the maturity date of the option.


There will be a payment if the underlying asset price is favourable for the option holder, compared with the strike price of the option.
Any contract or arrangement on terms which are unusually favourable for one party.


Options over non-physical underlying assets are always cash-settled.
Depending on the context, some sweetheart deals may be illegal or unenforceable.


The use of the term implies unfairness toward others who were not part of the sweetheart deal.


==== Foreign exchange put options ====
A foreign currency call option is the option to sell a specified quantity of the [[base currency]] in the currency pair, at the strike rate specified in the option.


== See also ==
* [[Arm’s length principle]]
* [[Base erosion and profit shifting]]
* [[Contract]]
* [[Single Market]]
* [[Tax avoidance]]
* [[Tax evasion]]


==== Interest rate options ====
[[Category:Accounting,_tax_and_regulation]]
'Lenders' options' hedge against a fall in interest rates.
 
For options over [[forward rate agreement]]s, this is a put option.
 
 
Put options over short-term interest rate [[futures contract]]s are 'borrowers' options'.
 
These hedge against a rise in interest rates.
 
 
 
== See also ==
* [[Bear spread]]
* [[Call option]]
* [[Central bank put]]
* [[Embedded option]]
* [[Option]]
* [[Put-call parity theory]]

Latest revision as of 14:51, 28 February 2018

1. Tax.

A tax arrangement which is unusually favourable for the taxpayer.


2. Tax.

The settlement of a tax dispute on terms which are unusually favourable for the taxpayer.


3.

Any contract or arrangement on terms which are unusually favourable for one party.

Depending on the context, some sweetheart deals may be illegal or unenforceable.

The use of the term implies unfairness toward others who were not part of the sweetheart deal.


See also

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