Premium
(a) Amount paid for a bond above the par value. (b) The price of an option contract; also, in futures trading, the amount the futures price exceeds the price of the spot commodity. |
Similar financial terms
Liquidity premiumThe amount that forward interest rates exceed expected future spot interest rates.
Time premium
Also called time value, the amount by which the option price exceeds its intrinsic value. The value of an option beyond its current exercise value representing the optionholder's control until expiration, the risk of the underlying asset, and the riskless return.
Term premiums
Excess of the yields to maturity on long-term bonds over those of short-term bonds.
Tender offer premium
The premium offered above the current market price in a tender offer.
Single-premium deferred annuity
An insurance policy bought by the sponsor of a pension plan for a single premium. In return, the insurance company agrees to make lifelong payments to the employee (the policyholder) when that employee retires.
Risk premium approach
The most common approach for tactical asset allocation to determine the relative valuation of asset classes based on expected returns.
Risk premium
The reward for holding the risky market portfolio rather than the risk-free asset. The spread between Treasury and non-Treasury bonds of comparable maturity.
Premium bond
A bond that is selling for more than its par value.
Option premium
The option price.
Call premium
Premium in price above the par value of a bond or share of preferred stock that must be paid to holders to redeem the bond or share of preferred stock before its scheduled maturity date.
Conversion premium
The percentage by which the conversion price in a convertible security exceeds the prevailing common stock price at the time the convertible security is issued.
Premium income
The income made by an insurance company resulting from premiums paid for insurance products.
