Exotic FX Options
The terms and conditions of the F/X options incorporate by reference such credit and other terms as the parties may establish through their pre-existing bilateral agreement. The F/X options have the following characteristics:
Contract Overview: | An exotic foreign-exchange option (or F/X option) is a derivative financial instrument that gives one party the right, but not the obligation, to buy or sell a specific quantity of one currency in exchange for another currency at a pre-arranged exchange rate on a specified date, with additional features to determine price, exercisability, termination or value that may be based on any number of factors, averages, indices or time periods. A listing of major F/X options appears below. |
Trade Date: | The date on which the parties enter into the options contract. |
Option Style: | European Style: A European style option allows the holder to exercise only at the expiration date, i.e. a single pre-defined point in time.
American Style: An American style option allows the owner to exercise the option at any time before the expiration date. |
Call Currency: | Currency for call option. |
Put Currency: | Currency for put option. |
Strike Price: | The price at which an investor can exercise an option. |
Rebate: | A feature of some exotic options where the premium of the option is refunded if at the time the option expires it has no value. |
Expiration Date: | The date at which the option contract expires. |
Expiration Time: | The time on which the option contract expires. |
Settlement Date: | The date on which the option settles. |
Premium: | Premium amount expressed in the premium currency. |
Premium Currency: | Currency in which the option premium is expressed. |
Premium Date: | The date on which the premium amount is due. |
Quoting Convention & Min Increment | Notional amount, agreed by the counterparties. |
Minimum Size: | Notional amount, agreed by the counterparties. |
Notional Currency: | Currency in which the contract size is expressed. |