Glossary

  • Zero cost option

    Any option strategy that involves financing an option purchase by the simultaneous sale of another option so that paid and received premiums exactly offset one another.

  • Zero coupon bond

    A debt instrument issued at below par value. The bond pays no coupons; instead, it is redeemed at face value at maturity.

  • Zero coupon swap

    An off-market swap in which either or both of the counterparties makes one payment at maturity. Usually it is the fixed-rate payments only that are deferred. The party not receiving payment until maturity incurs a greater credit risk than it would with an ordinary swap. The swap is advantageous for a company that will not receive payment for a project until it is completed or to hedge zero coupon liabilities, such as zero coupon bonds.

  • Zero exercise price option (ZEPO)

    A low exercise price option whose strike price is exactly zero.

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