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embedded option

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Financial Dictionary

Embedded Option

An option that is an inseparable part of another instrument. Compare this to a normal (or bare) option, which trades separately from the underlying security.

Investopedia Commentary

A common embedded option is the call provision in most corporate bonds.

Related Links

Options Basics Tutorial

See also: Call Provision, Option

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Financial Dictionary

embedded option

A provision within a security giving either the issuer or the security holder the right to take a specified action against the other. For example, a call provision is an embedded option in a bond that gives the issuer the right to redeem the bond prior to the scheduled maturity.

Wall Street Words: An A to Z Guide to Investment Terms by David L. Scott.
Copyright © 2003. Published by Houghton Mifflin.
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