Abandonment

AAA

DEFINITION of 'Abandonment'

1. The act of surrendering a claim to, or interest in, a particular asset.

2. The permitted withdrawal from a forward contract that is made for the purchase of deliverable securities.

3. The act of allowing an option to expire unexercised.

INVESTOPEDIA EXPLAINS 'Abandonment'

1. Corporations will generally abandon assets or projects that no longer offer any profitability. In most instances, proper legal documents must be filed with authorities and any damages must be recouped.

2. Abandonment occurs in forward contracts that permit the purchasers to withdraw from the contract, rather than purchase the deliverable securities.

3. In many instances, an option may not be worthwhile or profitable to exercise and, therefore, the purchaser of the option will let the option expire without being exercised.

RELATED TERMS
  1. Forward Contract

    A customized contract between two parties to buy or sell an asset ...
  2. Abandonment Option

    A clause granting parties the option of withdrawing from the ...
  3. Option

    A financial derivative that represents a contract sold by one ...
  4. Exercise

    To put into effect the right specified in a contract. In options ...
  5. Actual Total Loss

    A loss that occurs when the insured property is totally destroyed ...
  6. Abandonment Value

    The value of a project or asset if it were immediately liquidated ...
Related Articles
  1. Options & Futures

    Options Basics Tutorial

    Discover the world of options, from primary concepts to how options work and why you might use them.
  2. Options & Futures

    Top Brokers Offering Tools For Covered Calls

    Here are the brokers that offer the best tools for investors and traders to write covered calls and covered puts.
  3. Economics

    Effects of OIS Discounting for Derivative Traders

    The use of OIS discounting has important implications for derivative valuations and could positively or negatively impact a trader's profit or loss.
  4. Options & Futures

    The Perks of Trading Coffee Options

    As more people begin to trade coffee, we explain how coffee options work, who uses them, what drives valuations, and the risks and rewards.
  5. Trading Strategies

    Top Day Trading Instruments

    Day trading is an intense and often appealing activity. Investopedia provides the list of top financial instruments for day trading.
  6. Options & Futures

    Give Yourself More Options With Real Estate Options

    Real estate options have many benefits, including a smaller initial capital requirement.
  7. Options & Futures

    The Fancy Way To Diversify Your Portfolio: Precious Metal Options

    A guide with strategies on how to invest or trade in precious metals by using options.
  8. Options & Futures

    When And How To Take Profits On Options

    Here are the different criteria to ensure maximum profit taking while trading options.
  9. Options & Futures

    The Future Is Now: All About Futures ETFs

    A new security class - futures ETFs - is gaining popularity. We tell you how futures ETFs work and offer tips.
  10. Options & Futures

    How To Protect A Short Position With Options

    Short selling can be a risky endeavor, but the inherent risk of a short position can be mitigated significantly through the use of options.

You May Also Like

Hot Definitions
  1. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  2. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  3. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  4. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  5. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  6. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
Trading Center