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.

Quanto Swap

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.

The CME Nikkei is an example of a quanto. It is a futures contract for which the underlying asset - in this case, the Nikkei Stock Average Index - is settled in U.

Hughes Optioneering

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. Dictionary Term Of The Day.

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Quantity-Adjusting Option - Quanto Option Share. Quanto Swap Cross-Currency Transaction Cross-Currency Settlement Risk Currency Option International Currency Exchange Currency Bermuda Option Underlying Asset Accounting Currency.

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