The National Directory of Certified Public Accountants

Ask A CPA - Investments & Financial Planning

What Are Basket Options Packages ?

Basket options packages that involve the exchange of more than 2 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 foreign exchange market rate or at a prearranged rate of exchange. Multinational corporations with multicurrency cash flows frequently use basket options because 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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