Basket options

Basket options

Packages that involve the exchange of more than two currencies against a base currency at expiration. The basket option buyer purchases the right, but not the obligation, to receive designated currencies in exchange for a base currency, either at the prevailing foreign exchange market rate or at a prearranged rate of exchange. Multinational corporations with multicurrency cash flows frequently use basket options because it is generally cheaper to buy an option on a basket of currencies than to buy individual options on each of the currencies that make up the basket.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Basket Option

An option contract in which the underlying asset consists of several different assets. For example, a basket call may give one the right, but not the obligation, to buy more than one currency at the strike price (which is denominated in a currency other than any in the underlying). A basket option provides a way for a corporation to hedge against several different risks at the same time and to do so more cheaply. However, a rainbow option is exposed to the risk that only some, rather than all, of the underlying assets will move in the direction benefiting the holder. A basket option is also called a rainbow option.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
References in periodicals archive ?
They have approximately twenty-five different pre-arranged gift pack and gift basket options, which can be quickly and conveniently browsed on their gift basket quick comparison page, which includes pricing.
The company thoughtfully arranges many gift basket options featuring their Alaskan-grown products.
Renaissance has been engaged in a longstanding dispute with the IRS over the use of what are called "(https://www.nytimes.com/2015/07/09/business/dealbook/irs-cracks-down-on-hedge-fund-tax-strategy.html?_r=0) basket options ": complicated financial structures that allow hedge funds to treat, or critics say, disguise, short-term financial transactions as long-term investments.
The Treasury Department and IRS issued guidance on Wednesday to effectively halt the use of so-called "basket options," a tax loophole that high-net-worth investors use when investing in alternatives.
Using basket options to convert short-term gains into long-term gains.
Other gift basket options include premium baskets meant to impress, and goodie baskets meant to be shared with the entire office.
The hotel is offering three picnic basket options, and services of an Andaz Picnic Host to arrange a perfect picnic.
Vanmaele, 2004, Pricing of Arithmetic Basket Options by Conditioning, Insurance: Mathematics and Economics, 34: 55-77.
Available in a variety of clever themes -- including a Taste of Italy, Sushi Starter Kit, Beers from Around the World and Bedtime Bath for Baby -- Roundy's showcases its full array of gift basket options in catalogs available in all stores.
The sauces are sold in individual 16-ounce jars, but the company also offers food service sizes for restaurants and some impressive gift basket options
Her idea of plain vanilla includes complicated multi-currency basket options whose price depends on volatilities and correlations of all the currencies in the basket, and other financial engineering inventions that look plain only to quants comfortable with long equations full of Greek letters.
Typical examples are stochastic present values of future cash flows (see, e.g., Dhaene et al., 2002b, 2005), Asian options (see, e.g., Simon, Goovaerts, and Dhaene, 2000; Vanmaele et al., 2006; Reynaerts et al., 2006), basket options (see Deelstra, Liinev, and Vanmaele, 2004; Vanmaele, Deelstra, and Liinev, 2004) and Asian basket options (see Deelstra, Diallo, and Vanmaele, 2008, in press).