Equity Linked Foreign Exchange Option

(redirected from Portfolio Currency Protection Option)

Equity Linked Foreign Exchange Option

A position involving a combination of an option contract on a currency and a forward contract on a stock. If the currency's value moves in a direction favorable to the investor, the investor receives a payoff depending on the performance of the stock underlying the forward contract. If not, the investor does not receive a payoff. An ELF-X helps an investor hedge against foreign-exchange risk. It is also called a portfolio currency protection option.