Wasting Asset


DEFINITION of 'Wasting Asset'

An item that irreversibly declines in value, as a function of time. Wasting assets include vehicles, machinery and other fixed assets. Accountants attempt to quantify the amount that assets decrease in value over time, by assigning depreciation schedules to wasting assets, therefore, recognizing the decrease in value each year.

BREAKING DOWN 'Wasting Asset'

In investing, options are the most common type of wasting asset. An option's value has two components: a time value and an intrinsic value. As the option's expiration date nears, the time value of the option gradually declines to zero. At expiration, an option is worth only its intrinsic value. Nonetheless, wasting assets are usually of a physical nature and experience price erosions as time passes.

  1. Theta

    A measure of the rate of decline in the value of an option due ...
  2. Derivative

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  3. Wasting Trust

    A trust that holds plan assets when a qualified plan is frozen. ...
  4. Option

    A financial derivative that represents a contract sold by one ...
  5. Expiration Date (Derivatives)

    The last day that an options or futures contract is valid. When ...
  6. Time Decay

    The ratio of the change in an option's price to the decrease ...
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  1. How do hedge funds use equity options?

    With the growth in the size and number of hedge funds over the past decade, the interest in how these funds go about generating ... Read Full Answer >>
  2. Can mutual funds invest in options and futures?

    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
  3. How do futures contracts roll over?

    Traders roll over futures contracts to switch from the front month contract that is close to expiration to another contract ... Read Full Answer >>
  4. How does a forward contract differ from a call option?

    Forward contracts and call options are different financial instruments that allow two parties to purchase or sell assets ... Read Full Answer >>
  5. Why do companies enter into futures contracts?

    Different types of companies may enter into futures contracts for different purposes. The most common reason is to hedge ... Read Full Answer >>
  6. What does a futures contract cost?

    The value of a futures contract is derived from the cash value of the underlying asset. While a futures contract may have ... Read Full Answer >>

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