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imported>Doug Williamson |
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| 1. ''Banking''.
| | An amount of money given or proposed in relation to a transaction, for example a financial transaction. |
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| Banks' lending and deposit-taking relationships with their customers often give valuable options to the customers, as part of the relationship.
| | Usually, but not necessarily, quoted on the conventional basis for the market in question. |
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| For example, a customer's right to repay a fixed rate mortgage early.
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| | | Market prices include foreign exchange rates. |
| '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.
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| 2. ''Risk management - real options.''
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| More broadly, the risk to any organisation or individual that another market participant may exercise a real option, causing loss or inconvenience to the organisation or individual exposed to the option risk.
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| 3. ''Risk management - financial options.''
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| Any risk associated with a financial option, whether as the writer or the holder of the option.
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| == See also == | | == See also == |
| * [[Banking book]]
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| * [[Basis risk]]
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| * [[Interest Rate Risk in the Banking Book]] (IRRBB)
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| * [[Market Risk in the Banking Book]] (MRBB)
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| * [[Option]]
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| * [[Option writer]]
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| * [[Prepayment risk]]
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| * [[Real option]]
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| * [[Risk management]]
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| [[Category:The_business_context]] | | *[[Bid-offer price]] |
| [[Category:Identify_and_assess_risks]] | | * [[Cost]] |
| [[Category:Manage_risks]] | | *[[Market price]] |
| [[Category:Risk_frameworks]] | | *[[Market value]] |
| [[Category:Risk_reporting]] | | *[[Rate]] |
| [[Category:Financial_products_and_markets]] | | *[[Value]] |
| | *[[Yield]] |
Revision as of 09:21, 31 May 2017
An amount of money given or proposed in relation to a transaction, for example a financial transaction.
Usually, but not necessarily, quoted on the conventional basis for the market in question.
Market prices include foreign exchange rates.
See also
