In finance, a foreign-exchange option (commonly shortened to just FX option or currency option) is a derivative financial instrument that gives the owner the right but not the obligation to exchange money denominated in one currency into another currency at a pre-agreed exchange rate on a specified date. See Foreign exchange derivative.
The foreign exchange options market is the deepest, largest and most liquid market for options of any kind. Most trading is over the counter (OTC) and is lightly regulated, but a fraction is traded on exchanges like the International Securities Exchange, Philadelphia Stock Exchange, or the Chicago Mercantile Exchange for options on futures contracts. The global market for exchange-traded currency options was notionally valued by the Bank for International Settlements at $158.3 trillion in 2005.
Read more about Foreign-exchange Option: Example, Terms, Hedging, Valuation: The Garman–Kohlhagen Model, Risk Management
Famous quotes containing the word option:
“A self-respecting nation is ready for anything, including war, except for a renunciation of its option to make war.”
—Simone Weil (1909–1943)