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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.

 
 

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 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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