ABSTRACT
A currency option is an arrangement between an option holder (the buyer) and an option writer (the seller). It gives the holder the right, but not the obligation, either to buy or sell a quantity of one currency in exchange for another at a specified rate of exchange, known as the strike price or strike rate or exercise price. The option to buy or sell must be exercised on or before a specified expiry date, typically several months from the date the option is written. When a holder exercises the option, the option writer must comply with its terms, and buy or sell the currency at the specified strike price. Options lapse if they are not exercised by their expiry date.
