A quantoed option whose payoff is determined based on a contractually agreed exchange rate and the difference between the strike price and the sport price (spot exchange rate) at expiration. The payoff for a quantoed put option (per unit of underlying rate) is given by:
The payoff for a quantoed put option (per unit of underlying rate) would be given by:
Payoffput = FXfixed × max [X -S, 0]
Where: FXfixed is the pre-agreed exchange rate, S is the spot price at expiration, and X is the option’s strike price.
Quantoed put options are also known as quanto put options.
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