Price-Based Option

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DEFINITION of 'Price-Based Option'

A derivative financial instrument in which the underlying asset is a debt security. Typically, these options give their holders the right to purchase or sell an underlying debt security (usually a bond) or to receive cash payment based on the current value of the underlying debt security.

INVESTOPEDIA EXPLAINS 'Price-Based Option'

This unique type of option has been traded in the past, but it is rarely traded in modern financial markets. The yield-based option is a more commonly-traded relative of the priced-based option.

RELATED TERMS
  1. Bond

    A debt investment in which an investor loans money to an entity ...
  2. Bond Option

    An option contract in which the underlying asset is a bond. Other ...
  3. Underlying

    1. In derivatives, the security that must be delivered when a ...
  4. Option

    A financial derivative that represents a contract sold by one ...
  5. Derivative

    A security whose price is dependent upon or derived from one ...
  6. Yield-Based Option

    A type of debt-instrument-based option that derives its value ...
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