Term

Revision as of 08:46, 11 July 2018 by Amwelladmin (talk | contribs) (Created page with "The length of time for which one is committed to any transaction or lending arrangement. The longer the term, the more risky the investment, because the time value of the opti...")
(diff) ← Older revision | Latest revision (diff) | Newer revision → (diff)

The length of time for which one is committed to any transaction or lending arrangement. The longer the term, the more risky the investment, because the time value of the option you have written on the counterparty's credit exposure increases.

One way of reducing this term exposure is to make an instrumnet transferable - so you can sell it to another investor and close out your own exposure.