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Definition of 'Yield-Based Option'
A type of debt-instrument-based option that derives its value from the difference between the exercise price and the value of the yield of the underlying debt instrument. Yield-based options are settled in cash. A yield-based call buyer expects interest rates to go up, while a yield-based put buyer expects interest rates to go down.
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Investopedia explains 'Yield-Based Option'
If the interest rate of the underlying debt security rises above the strike price of a yield-based call option plus the premium paid, the call holder is 'in the money'. Should the opposite occur, and the interest rate falls below the strike price less the premium paid for a yield-based put option, the put holder is in the money.
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Search results for 'Yield-Based Option'
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http://www.investopedia.com/exam-guide/series-7/derivatives/foreign-currency-debt-options.asp
... traded in the future but, as of this writing, only yield-based options are ... Other
countries issue bonds and certainly have robust debt option markets of their ...
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http://www.investopedia.com/exam-guide/cfa-level-1/quantitative-methods/discounted-cash-flow-yield.asp
... Values for Options; 15.32 Straddles and Strangles; 15.33 Option Prices and
the Time to Expiration; 15.34 Put-Call Parity; 15.35 Effect ...
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http://www.investopedia.com/articles/optioninvestor/10/options-symbol-rules.asp
... continued using this system for a very long time, the introduction and proliferation
of such products as LEAP option, index options, yield-based options, short ...
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http://stocks.investopedia.com/stock-analysis/2010/RSC-Rents-And-Then-Prints-Cash-RRR-HTZ-URI-HD0224.aspx
... Equipment rental is a much better option for cash-strapped customers or businesses
who ... That number represents a 14% free cash yield based on a $2.9 billion ...
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