Question

A foreign currency ________ gives the purchaser the right, not the obligation, to buy a given amount of foreign exchange at a fixed price per unit for a specified period.

Answer 1

The answer is Option.

An option contract is an agreement between two parties to facilitate a potential transaction involving an asset at a preset price and date.

An options contract offers the buyer the opportunity to buy or sell, depending on the type of contract they hold. If the contract states buying it will be the Call option. On the other hand, if the contract states selling it will become a Put option.

Buying an option offers the right, but not the obligation, to purchase or sell the underlying asset.

Hence, A foreign currency Option gives the purchaser the right, not the obligation, to buy a given amount of foreign exchange at a fixed price per unit for a specified period.

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