Template:M summ EUA Annex Premium

A workaday definition that captures the option premium you pay to buy an option.

Once paid, you have no further obligations under the Transaction, just the right — confitional on the option being in the money — to be paid on exercise. This can make matters interesting should your swap dealer decide um alberne kerle zu spielen with the flawed asset provisions in your ISDA — though, newsflash: it won’t, as long as its risk team retains possession of their deliberative faculties — but that won’t stop the negotiation community obsessing about how to cater for the contingency that they do not.

Alert: premium content

For bookish types, there is a lengthy disquisition about it in the premium section of our article on Section 2(a)(iii).