Currency option

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Currency option

An option to buy or sell a foreign currency.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Currency Option

An option contract in which the underlying asset is a foreign currency. The option gives the holder the right but not the obligation to buy (for a call) or sell (for a put) a set amount of the currency at a certain exchange rate on or before the expiration date. They are largely used when international corporations wish to hedge against the possibility of adverse movements in foreign exchange rates.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
References in periodicals archive ?
The Sub-Committee noted a study which used foreign exchange option prices to assess the credibility of the LERS using an improved asset pricing model.
Risk reversals in the foreign exchange option market do not really indicate any real demand for loonie weakness protection.
I had flagged the Turkish lira as a strategic short when skews in London foreign exchange option markets suggested that the smart money was bailing out of the lira.
Alternatively, they can select a foreign exchange option that allows them to guarantee themselves a minimum exchange rate whilst benefiting from any improvements.
A foreign exchange option is a contract that allows the holder to purchase or sell a designated quantity of foreign currency at a specified price or exchange rate up to a specified date.
Risk reversals in the Tokyo foreign exchange option markets suggest lower demand for protection against yen strength.
Baris Temelkuran, head of exotic foreign exchange options trading at Goldman Sachs (NYSE: GS), is leaving the firm.
NEW YORK: BNY Mellon is now live with foreign exchange options. BNY Mellon clients now have access to a full-service currency trading desk, offering spot, forwards, non-deliverable forwards as well as options.
His team works with clients to design effective hedging strategies, utilizing foreign exchange options and cross-currency swaps.
The bourse plans to introduce index options in the second quarter of 2013 and foreign exchange options will start trading in 2013, Yilmaz said.Source: bne
The prices for foreign exchange options allow us to extract information on implied market perceptions of future exchange rate risk.

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