Option risk

From ACT Wiki
Jump to: navigation, search

Banking.

Banks' lending and deposit-taking relationships with their customers often give valuable options to the customers, as part of the relationship.

For example, a customer's right to repay a fixed rate mortgage early.


'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.


See also