Hi for everyone.
Did meet some problem with prepaid variable forward (PVF) definition. In Kaplan it is defined as a simmilar to collar instrument. But collar has out-of-the-money call, so investor doesn’t participate in any gain over specified price in call option. Hovewer PVF is constructed in a following way
Dealer pays at start $45 for share (which is priced at $50)
Owner delivers less shares at specified date if price increases over $50. Does it mean that owner still participate in some gain?
I have exact same q- why it’s called collar+ loan? It looks like forward to me with added conditions
Anybody can clearify?
Yes, owner can participate in gain to some extent. In my opinion investopedia provides much better definition than schweser.
http://www.investopedia.com/terms/v/variable-prepaid-forward-contracts.asp
Yes, owner can participate in gain to some extent. In my opinion investopedia provides much better definition than schweser.
http://www.investopedia.com/terms/v/variable-prepaid-forward-contracts.asp