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search  A quanto is a type of derivative in which the underlying
is denominated in one currency, but the instrument itself is
settled in another currency at some fixed rate. Such products
are attractive for speculators and investors who wish to have
exposure to a foreign asset, but without the corresponding
exchange rate risk.  Quantos are attractive because they shield
the purchaser from exchange rate fluctuations. If a US investor
were to invest directly in the Japanese stocks that comprise the
Nikkei, he would be exposed to both fluctuations in the Nikkei
index and fluctuations in the USD/JPY exchange rate.
Essentially, a quanto has an embedded currency forward with a
variable notional amount. It is that variable notional amount
that give quantos their name—"quanto" is short for "quantity
adjusting option."  Quanto options have both the strike price
and underlier denominated in the foreign currency. At exercise,
the value of the option is calculate