Redeem

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Redeem
/rɪˈdiːm/ (n.)
Of a financial instrument, to surrender it for cancellation against payment, delivery or some other abstract benefit, such as the discharge of a liability. Often its face value, redemption amount, or net asset value.

One can only redeem an instrument per its terms and conditions: usually upon a stated maturity date, an optional redemption date, or on the occurrence of some observable market event or strike price, although some instruments (like units in a hedge fund or open-ended investment company) allow you periodic or even daily redemption rights.

Other financial instruments (e.g. shares) have no redemption rights, ever.

If you want to end your investment in a financial instrument and you cannot redeem it, you must sell it in the secondary market.

Emissions allowances

Emissions allowances are funny things in that they are redeemed against discharge of an obligation to pay the penalty that arises if you discharge carbon and don’t redeem them, but that penalty is oddly never payable as long as you do redeem them. There is some weird ontological cart-and-horse magic going on here, so it is best not to think to hard about it.

See also

• Subscription
• Secondary market