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Derivatives

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  • February 19, 2021
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TAR Option

It stands for target redemption option; an exotic option that gives the holder the right to receive a stream of payments up to a maximum total accumulation value. For example, an option with 3 -year maturity may pay 6% of the initial price of its underlying asset, up to a total maximum of 10%, if the underlying trades above its initial value in each of the three years. This option would only have two payment maximum thresholds, after the second of which, it expires worthless.


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