Quanto: Difference between revisions

Quanto (view source)

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	A [[quanto]], or "[[quantity adjusting option]]", is a {{~~tag2~~\|~~derivatives~~\|~~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 [[quanto]], or "[[quantity adjusting option]]", is a {{t2\|Derivatives\|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.