Quanto Option

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Quanto Option

A cash-settled futures contract or other derivative in which the underlying asset is denominated in a currency other than the one in which it is settled. For example, two investors may enter into an agreement to buy/sell a futures contract on an index in which the index is in British pounds but the contract is settled in euros. The exchange rate at which the contract is settled is determined at the beginning of contract, protecting the investors from the foreign exchange risk that the currencies will adversely change in value.
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For Morgan Stanley, Triple Point will enhance the core TEMPEST system to provide regulatory reporting, support for physical natural gas trading and scheduling, and processing of such new "exotic" derivative instruments as basis options, binary options, compound options, quanto options, and extendables.
Quanto options - that is, options on a foreign index with the spot and strike prices denominated in a foreign currency but cash flows taking place at a fixed exchange rate in the domestic currency - have become increasingly popular.
American and European Options - Barrier Options - Lookback Options - Zero Cost Collars - Digital Options - Quanto Options - Straddles, Strangles, and Spreads - Asian Options - Outperformance Options