A type of quanto option whose value depends on the spot exchange rate at expiration date relative to a guaranteed level of exchange rate. At maturity, the dollar value of a joint quanto is given by:
MAX (FXT, FXG) x Max (0, S – X)
where: FXT is the exchange rate at maturity, FXG is the guaranteed exchange rate, S is the value of a foreign-currency-denominated asset, X is the option’s strike price.
The second expression, i.e., Max (0, S – X), captures the exposure to an unspecified amount of a given foreign currency.
