Quanto: Difference between revisions
Jump to navigation
Jump to search
Amwelladmin (talk | contribs) 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 ..." |
Amwelladmin (talk | contribs) No edit summary |
||
| Line 1: | Line 1: | ||
A [[quanto]], or "[[quantity adjusting option]]", is a | A [[quanto]], or "[[quantity adjusting option]]", is a {{tag|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. | ||
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. | ||
| Line 5: | Line 5: | ||
====See also==== | ====See also==== | ||
*{{eqdefs}} | *{{eqdefs}} | ||
{{eqderivanatomy}} | |||
Revision as of 18:11, 9 November 2012
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.
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.