Investopedia

Continue to Site »

Quantity-Adjusting Option - Quanto Option

Filed Under » , , ,
Dictionary Says

Definition of 'Quantity-Adjusting Option - Quanto Option'

A cash-settled, cross-currency derivative in which the underlying asset is denominated in a currency other than the currency in which the option is settled. Quantos are settled at a fixed rate of exchange, providing investors with shelter from exchange-rate risk. At the time of expiration, the option's value is calculated in the amount of foreign currency and then converted at a fixed rate into the domestic currency.
Investopedia Says

Investopedia explains 'Quantity-Adjusting Option - Quanto Option'

The CME Nikkei 225 is an example of a quanto. It is a futures contract for which the underlying asset - in this case, the Nikkei 225 Stock Average Index - is settled in U.S. dollars, as opposed to Japanese yen.

Investors use quantos when they believe that a security will do well in another country but fear that country's currency will not. Thus, investors buy an option in the foreign stock while keeping the payout in their home currency.

Articles Of Interest

  1.

    Getting Started In Foreign Exchange Futures

    Learn how these futures are used for hedging and speculating, and how they are different from traditional futures.

  2. Options On Futures: A World Of Potential Profit

    There's one simple hurdle in the transition from stock to futures options: learning about product specifications.

  3. Forecast The FX Market With The COT Report

    Three empirical findings on futures data can help currency traders determine buy and sell points.

  4. What's the difference between a regular option and an exotic option?

    Before learning about exotic options, you should have a fairly good understanding of regular options. Both types of options share the idea of having the right to buy or sell an asset in the future, ...

  5. Making It Big On Wall Street

    Read about some of the most glamorous Wall Street jobs and what it takes to land one.

  6. Quants: The Rocket Scientists Of Wall Street

    Blend math, finance and computer skills to command a high - and well deserved - salary.

  7. Uncovering Oil And Gas Futures

    Find out how to stay on top of data reports that could cause volatility in oil and gas markets.

  8. Trading Is Timing

    Learn how to make gains even if you don't get in at the right time.

  9. Build A Baby Berkshire

    Get a piece of Warren Buffett's profit by using Form 13F to coattail his picks.

  10. Leading Economic Indicators Predict Market Trends

    Leading indicators help investors to predict and react to where the market is headed.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.

  2. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.

  3. Affluenza

    A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses." Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements.

  4. Icarus Factor

    The term Icarus factor describes a situation where managers or executives initiate an overly ambitious project which then fails. Fueled by excitement for the project, the executives are unable to reign in their misguided enthusiasm before it is too late to avoid the failure.

  5. Angelina Jolie Stock Index

    An index made up of a selection of stocks from companies associated with actress Angela Jolie.

  6. Consequential Loss

    The amount of loss incurred as a result of being unable to use business property or equipment.
Trading Center