Quanto Option

What does it mean?
An option in one country's currency that pays out in another country's currency.

In Other Words...
This is usually used when an investor believes that a stock will do well in another country, but fears that the country's currency will not. The investor buys an option in the foreign stock while keeping the payout in his or her home currency.

Related Links
Options Basics Tutorial - An introduction to the world of options, covering everything from primary concepts to how options work and why you might use them.

Financial Derivatives and Foreign Currency Risk - Detailed examples of swaps, including quanto swaps

Related Terms
Equity-Linked Foreign Exchange Option - ELF-X | FOREX | Option

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