A quanto (quantity) option is one in which the option contains price risk from two sources. Quantos
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A quanto (quantity) option is one in which the option contains price risk from two sources. Quantos are discussed in the chapter on exotic options. An example is where you buy a put option on the Nikkei stock index (which is yen denominated), but the strike price of the option is stated in dollars. Explain what the different sources of risk in such an option might be. For each source of risk, state in which direction it must move for the value of the option to increase.
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A quanto option or a quantityadjusting option has two primary sources of risk 1 The underlying assets price risk This is the risk associated with changes in the price of the underlying asset ...View the full answer
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