preferentie

Preferentie refers to a concept in Dutch law and behavioral economics. In a financial context, it describes a derivative payment that is paid by an option seller to the option buyer on each business day, while the option is in effect. This payment is based on the difference between a predetermined preferentie and a computed index value.

The preferentie payment serves as a form of compensation to the option buyer, tied to the performance of an underlying asset. This can be a stock, currency, or commodity. The seller of the option pays the preferentie, regardless of whether the underlying asset moves in their favor or not.

The mechanism of the preferentie payment can be understood through an analogy to insurance. The option seller assumes the risk of the underlying asset's performance, and in exchange, charges a fee, which is the preferentie payment. This fee is designed to be a fair reflection of the risks assumed by the option seller.

Preferentie payments are most commonly associated with trading in options on the Amsterdam Stock Exchange (Euronext Amsterdam) and related markets. The concept is also discussed in various works on behavioral economics, which examine the investor's perception of these kinds of payments.

As with other financial instruments, the specifics of the preferentie payment can be complex, including the details of computation and any associated fees. In practice, a preferentie payment can be designed in various ways, depending on the contractual terms agreed upon by the parties involved.