imported>Doug Williamson |
imported>Doug Williamson |
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| | ''VAT.'' |
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| A financial option is a derivative instrument giving the holder the right - but not the obligation - to buy or sell an underlying asset on or before a future date at a specified price.
| | Turns an exempt supply relating to land or buildings into a standard rated supply for UK VAT purposes. |
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| Options are more commonly ‘cash settled’ by paying or receiving a net cash amount, rather than being settled by physical delivery of the underlying asset.
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| Like other derivative instruments, options can be used to:
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| • Speculate by creating new exposures to market rates.
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| • Hedge existing exposures to changes in market rates.
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| • Arbitrage in combination with other related instruments to achieve 'risk free' profits.
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| When used for hedging purposes, options generally provide insurance-like protection against worst case outcomes. (Contrasted with 'fixing' hedging instruments - such as FRAs - which effectively fix the market rate being hedged.)
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| More generally, choice.
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| 3.
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| A real option is an option relating to an operational decision or outcome.
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| == See also == | | == See also == |
| * [[American-style option]] | | * [[Exempt]] |
| * [[Asian option]] | | * [[Standard rated]] |
| * [[Barrier option]] | | * [[VAT]] |
| * [[Binomial option pricing model]]
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| * [[Black Scholes option pricing model]]
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| * [[Call option]]
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| * [[Cash settlement]]
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| * [[Delta]]
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| * [[Derivative instrument]]
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| * [[European-style option]]
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| * [[Exercise]]
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| * [[Exotic option]]
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| * [[Fixing]]
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| * [[Fixing instrument]]
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| * [[Foreign exchange forward contract]]
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| * [[Futures contract]]
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| * [[Greeks]]
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| * [[Hedging]]
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| * [[Insurance]]
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| * [[Interest rate guarantee]]
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| * [[Interest rate option]]
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| * [[Outright]]
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| * [[Payoff]]
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| * [[Put option]]
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| * [[Put-call parity theory]]
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| * [[Real option]]
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| * [[Straddle]]
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| * [[Strike price]]
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| * [[Swaption]]
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| * [[Traded option]]
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| * [[Underlying asset]]
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| * [[Underlying price]]
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| * [[Volatility index]]
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| * [[Warrant]]
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| [[Category:Manage_risks]] | | [[Category:Accounting,_tax_and_regulation]] |
