- Front Fee
- The option premium paid by an investor upon the initial purchase of a compound option. A compound option is one where the underlying asset is also an option (i.e. an option on an option). The front fee gives the investor the right - but not the obligation - to exercise the compound option. If exercised, another fee known as the "back fee" is payable for the underlying option.
Compound options are used in situations where uncertainty exists regarding the requirement for risk mitigation. For example, a company may submit a bid for an overseas project. If successful, the project would generate significant revenue in a foreign currency, which may need to be hedged against exchange rate risk. A compound option would be useful in this case, because the front fee payable would be lower than the premium payable on a foreign currency option contract (which is a contingent liability in any case).
Investment dictionary. Academic. 2012.
Look at other dictionaries:
Front fee — The fee initially paid by the buyer upon entering a split fee option contract. The New York Times Financial Glossary … Financial and business terms
front fee — The fee initially paid by the buyer upon entering a split fee option contract. Bloomberg Financial Dictionary … Financial and business terms
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front — [ frɔ̃ ] n. m. • 1080; lat. frons I ♦ 1 ♦ Partie supérieure de la face humaine, comprise entre les sourcils et la racine des cheveux, et s étendant d une tempe à l autre. Un front haut, élevé, large, bombé, fuyant. Les rides du front. Cheveux sur … Encyclopédie Universelle
Fée dans l'art et la littérature — Article principal : Fée. The fairy banquet (le banquet des fées), peinture de John Anster Fitzgerald, 1859. La fée, être légendaire issu des croyances populaires, est abondamment représentée dans l art et la littérature. Les premières… … Wikipédia en Français
front-end — ¦ ̷ ̷ ¦ ̷ ̷ adjective : relating to or required at the beginning of an undertaking take some time for the huge front end investment to be paid off Wall Street Journal * * * frontˈ endˈ noun The aspects involved in the running of an operation, eg… … Useful english dictionary
front-end load — A form of sales charge imposed by some mutual funds. A front end load is an initial charge that is deducted from each investment made in the fund. The amount of the charge is usually a percentage of the amount of the investment. See back end load … Financial and business terms