imported>Doug Williamson |
imported>Administrator |
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| | (ITM). |
| | | 1. An option is in the money for the holder when immediate exercise of the option would result in a gain for the option holder. |
| Most commonly, UK central government debt.
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| Also known as Gilt-edged securities, or Gilt-edged stock.
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| :<span style="color:#4B0082">'''''Example 1: Short-dated Conventional gilt'''''</span>
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| :An example of a short-dated conventional UK gilt is the 2% Treasury Gilt 2020.
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| :Each £100 gilt repays £100 to the owner on 22 July 2020.
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| :It will also pay interest on 22 July 2020, calculated at 2% per year. It was originally issued in 2014.
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| :It pays a predetermined fixed amount of interest (2% per year) throughout its whole life.
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| :It will be repaid at a fixed amount of £100 at its maturity on 22 July 2020.
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| :Whatever happens to inflation in the meantime, these amounts will not change.
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| :<span style="color:#4B0082">'''''Example 2: Long-dated Conventional gilt'''''</span>
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| :A very long dated conventional gilt is the 4% Treasury Gilt 2060.
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| :It will pay interest at 4% per year until 2060.
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| :<span style="color:#4B0082">'''''Example 3: Index-linked gilts'''''</span>
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| :Index-linked gilts pay out larger amounts, the higher the rate of inflation.
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| :The 'index' they are linked to is the UK Retail Prices Index (RPI).
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| :About 25% of UK gilts are index-linked, with 75% being conventional.
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| Historically, gilts were printed on gilt-edged paper (heavy bond paper with a metallic edge, usually gold-leaf or gold paint).
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| The heavy expensive looking paper was designed to give confidence in the promise.
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| 2.
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| The term 'gilt' is also used to refer to the debt of certain other central governments, especially US government [[treasury securities]].
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| | 2. A derivative such as a swap is in the money when, for example, the swap rate is favourable compared with the current market rate, so that the net present value of the derivative is positive. |
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| == See also == | | == See also == |
| * [[Bill]] | | * [[At the money]] |
| * [[Bond]] | | * [[Out of the money]] |
| * [[Bund]]
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| * [[Exempt gain]]
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| * [[G+]]
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| * [[ILG]]
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| * [[Index-linked gilt]]
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| * [[Paper]]
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| * [[Risk-free rate of return]]
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| * [[Semi-annual rate]]
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| * [[Sovereign]]
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| * [[Stock]]
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| * [[Swap spread risk]]
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| * [[Tap stock]]
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| * [[Treasury]]
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| * [[United Kingdom]]
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| [[Category:Corporate_financial_management]]
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(ITM).
1. An option is in the money for the holder when immediate exercise of the option would result in a gain for the option holder.
2. A derivative such as a swap is in the money when, for example, the swap rate is favourable compared with the current market rate, so that the net present value of the derivative is positive.
See also
