What is ‘Back Fee’
A payment made to the writer of a compound option in the case that the call option is exercised in order to obtain a put option. Back fee is a premium charged at the second portion of the option, since a compound option is an option to purchase an option.
Explaining ‘Back Fee’
Compound options are most commonly used by mortgage originators as a way to mitigate risk. The back fee is offered at a premium, because it provides an investor with the ability to wait before executing an option.
Further Reading
- Trends in park tourism: Economics, finance and management – www.tandfonline.com [PDF]
- The experience of Ghana in implementing a user fee exemption policy to provide free delivery care – www.tandfonline.com [PDF]
- Mutual fund fee–setting, market structure and mark–ups – onlinelibrary.wiley.com [PDF]
- Board structure and fee-setting in the US mutual fund industry – www.sciencedirect.com [PDF]
- Corporate risk disclosure and audit fee: A text mining approach – www.tandfonline.com [PDF]
- The risk premium of audit fee: evidence from the 2008 financial crisis – www.tandfonline.com [PDF]
- Interchange Fee Economics – link.springer.com [PDF]
- The willingness to pay for higher education: does the type of fee matter? – www.tandfonline.com [PDF]
- Audit fee pressure and audit risk: evidence from the financial crisis of 2008 – www.tandfonline.com [PDF]
- The association between audit committee and board of director effectiveness and changes in the nonaudit fee ratio – www.tandfonline.com [PDF]
