wasting asset

Wasting Asset

A derivative security that loses value due to time decay.

Investopedia Commentary

If wasting assets are held for too long, they will ultimately lose all their value. Derivatives such as options are thought of as wasting assets since they have fixed expiration dates and lose value as the time gap until expiration narrows.

Related Links

The Importance of Time Value
Options Basics Tutorial

See also: Derivative, Expiration Date, Option, Theta, Time Decay

wasting asset

An asset that tends to decline in value over time as its expected life is used up. A factory machine or an automobile is a wasting asset. Some individuals also consider options or warrants wasting assets because they have a limited life after which they are valueless. Also called shrinking asset.