ABSTRACT

The quanto option is a contingent claim whose investor has to consider to hedge the risk from both the foreign stock price and exchange rate simultaneously. This chapter discusses two cases of quanto options: (1) an option of floating exchange rate, written on foreign stock in terms of foreign currency, whose value is transformed to domestic currency value by exchange rate at maturity time; (2) an option of fixed exchange rate, by which the value of this option is transformed to domestic currency value at maturity time.