Put option and TARGET2: Difference between pages

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TARGET2 (Trans-European Automated Real-time Gross settlement Express Transfer system) is an interbank payment system for the real-time processing of cross-border transfers throughout the EU.


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.
Strictly speaking it is not itself a funds transfer system, rather it links existing national payment systems.




2.
''TARGET2 is the successor to the earlier TARGET payment system.''
 
A similar option over a non-physical underlying asset.
 
 
__NOTOC__
==== 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.
 
Options over non-physical underlying assets are always cash-settled.
 
 
==== 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.
 
 
==== Interest rate options ====
'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 ==
* [[Trans-European automated real-time gross settlement express transfer]]
* [[Gross settlement system]]
* [[ISO 20022]]
* [[Payments and payment systems]]


== See also ==
[[Category:Cash_management]]
* [[Bear spread]]
* [[Call option]]
* [[Central bank put]]
* [[Embedded option]]
* [[Option]]
* [[Put-call parity theory]]

Revision as of 16:38, 19 November 2017

TARGET2 (Trans-European Automated Real-time Gross settlement Express Transfer system) is an interbank payment system for the real-time processing of cross-border transfers throughout the EU.

Strictly speaking it is not itself a funds transfer system, rather it links existing national payment systems.


TARGET2 is the successor to the earlier TARGET payment system.

See also

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