Quanto: Difference between revisions

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Created page with "A quanto, or "quantity adjusting option", is a derivative in which the underlying exposure is denominated in one currency, but the instrument itself is settled by ..."
 
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A [[quanto]], or "[[quantity adjusting option]]", is a [[derivative]] in which the underlying exposure is denominated in one currency, but the instrument itself is settled by reference to another currency at a fixed rate determined at the outset of the transaction. Quantos accordingly shield the purchaser from exchange rate fluctuations.  
{{a|eqderiv|}}[[Quanto]]s, or "[[quantity adjusting option]]s", are [[derivatives]] in which the underlying exposure is denominated in one [[currency]], but the instrument itself is settled by reference to another currency at a fixed rate determined at the outset of the transaction. Quantos accordingly shield the purchaser from [[FX|exchange rate]] fluctuations.  


Essentially, a quanto has an embedded currency forward with a variable notional amount. It is that variable notional amount that give the quantity adjusting option its name.
Essentially, a quanto has an embedded currency forward with a variable notional amount. It is that variable notional amount that give the [[quantity adjusting option]] its name.
 
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Latest revision as of 13:30, 14 August 2024

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Quantos, or "quantity adjusting options", are derivatives in which the underlying exposure is denominated in one currency, but the instrument itself is settled by reference to another currency at a fixed rate determined at the outset of the transaction. Quantos accordingly shield the purchaser from exchange rate fluctuations.

Essentially, a quanto has an embedded currency forward with a variable notional amount. It is that variable notional amount that give the quantity adjusting option its name.