embedded derivative instrument

Defined by FASB in FAS 133. An implicit or explicit term in a contract such as a bond, insurance policy, or lease, that meets the definition of a derivative even though the entire contract may not. Under FAS 133, the certain embedded derivatives must be separated from the host contract for purposes of reporting and accounting.
See embedded option and FAS 133. American Banker Glossary

Financial and business terms. 2012.

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