Investments, tenth edition

  Currency-Translated Options 

 Currency-translated options have either asset or exercise prices denominated in a foreign 

currency. For example, the  quanto  allows an investor to fix in advance the exchange rate at 

    20.7 

Exotic Options 

bod61671_ch20_678-721.indd   709

bod61671_ch20_678-721.indd   709

7/25/13   2:50 AM

7/25/13   2:50 AM

Final PDF to printer

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     1.   A call option is the right to buy an asset at an agreed-upon exercise price. A put option is the right 

to sell an asset at a given exercise price.  

    2.   American-style options allow exercise on or before the expiration date. European options allow 

exercise only on the expiration date. Most traded options are American in nature.