Contingent Currency Risk

Currency exchange rate risk associated with a transaction that may or may not occur. A contract proposal, for example, may lead to currency exposure only if the contract is executed. This contingent currency exposure may be hedged with a traditional option or-at a lower premium-with one of several specialized options designed for this problem. See Contingent Hedge with an Agreement for Rebate at Maturity (CHARM). Also called Shared Currency Option Under Tender (SCOUT).

Glossary * C