Basket options
Packages that involve the exchange of more than two currencies against a base currency at expiration. The basket option buyer purchases the right, but not the obligation, to receive designated currencies in exchange for a base currency, either at the prevailing spot market rate or at a prearranged rate of exchange. A basket option is generally used by multinational corporations with multicurrency cash flows since it is generally cheaper to buy an option on a basket of currencies than to buy individual options on each of the currencies that make up the basket. |
Similar financial terms
Currency basketThe value of a portfolio of specific amounts of individual currencies, used as the basis for setting the market value of another currency. It is also referred to as a currency cocktail.
Static options replication
A static options replication is a procedure for hedging a portfolio that involves finding another portfolio of approximately equal value on some boundrary.
Options on physicals
Interest rate options written on fixed-income securities, as opposed to those written on interest rate futures contracts.
Options contract multiple
A constant, set at $100, which when multiplied by the cash index value gives the dollar value of the stock index underlying an option. That is, dollar value of the underlying stock index = cash index value x $100 (the options contract multiple).
Options contract
A contract that, in exchange for the option price, gives the option buyer the right, but not the obligation, to buy (or sell) a financial asset at the exercise price from (or to) the option seller within a specified time period, or on a specified date (expiration date).
Margin requirement (Options)
The amount of cash an uncovered (naked) option writer is required to deposit and maintain to cover his daily position valuation and reasonably foreseeable intra-day price changes.
Barrier options
Contracts with trigger points that, when crossed, automatically generate buying or selling of other options. These are very exotic options.
Chicago Board Options Exchange (CBOE)
A securities exchange created in the early 1970s for the public trading of standardized option contracts.
Dealer options
Over-the-counter options, such as those offered by government and mortgage-backed securities dealers.
