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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.

 
 

Follow this link for all the terms related to option.

 
 Embedded terms in definition
 Buy in
Buy
Cash flow
Cash
Currency
Exchange
Expiration
Market
Multinational corporation
Options
Option
Right
Spot market
The exchange
 
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