The document discusses the special currency risks associated with foreign currency options. It highlights how the value of any currency, including U.S. dollars, can be affected by political and economic factors of the issuing country. The price of a foreign currency option depends on the value of the underlying currency and its relative value to other currencies. Fluctuations in exchange rates can affect the value of options, even if the underlying currency remains stable. Investors should consider factors affecting the economies and currency values of both the trading and underlying currencies. The document also provides an example involving a yen-denominated call option on British pounds.
documents/vol00010-efta01353468-pdf.pdf
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