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Rebate
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A sum repaid to some option buyers if an in option is not activated or an out option is terminated because the underlying hits the outstrike. Rebates provide a payoff pattern intermediate between a traditional option structure where the position has a minimum value of zero and a debt-based structure where the minimum value at expiration might be the value of the initial investment. A structure calling for a rebate may facilitate a dealer's hedging activity. Examples include Cash-Out Call Option with Rebate, Cash-Out Put Option with Rebate.
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