Mutually exclusive in the context of "Embedded option"


Mutually exclusive in the context of "Embedded option"

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⭐ Core Definition: Mutually exclusive

In logic and probability theory, two events (or propositions) are mutually exclusive or disjoint if they cannot both occur at the same time. A clear example is the set of outcomes of a single coin toss, which can result in either heads or tails, but not both.

In the coin-tossing example, both outcomes are, in theory, collectively exhaustive, which means that at least one of the outcomes must happen, so these two possibilities together exhaust all the possibilities. However, not all mutually exclusive events are collectively exhaustive. For example, the outcomes 1 and 4 of a single roll of a six-sided die are mutually exclusive (both cannot happen at the same time) but not collectively exhaustive (there are other possible outcomes; 2,3,5,6).

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👉 Mutually exclusive in the context of Embedded option

An embedded option is a component of a financial bond or other security, which provides the bondholder or the issuer the right to take some action against the other party. There are several types of options that can be embedded into a bond; common types of bonds with embedded options include callable bond, puttable bond, convertible bond, extendible bond, exchangeable bond, and capped floating rate note. A bond may have several options embedded if they are not mutually exclusive.

Securities other than bonds that may have embedded options include senior equity, convertible preferred stock and exchangeable preferred stock. See Convertible security.

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