European vanilla FX option
A call or put whose exercise right is determined at expiry. Keep the option's value separate from its premium and total P&L.
How it works
Call means the right to buy the pair's base currency; Put means the right to sell it. Buy/Sell instead identifies the holder or writer. Before expiry, OTCValue uses Black-76 with the FX forward, quote-currency discounting and implied volatility derived from listed options.
Key contract terms
- Currency pair and base-currency notional
- Call or Put
- Bought or written option
- Strike and expiry
- Optional premium amount and currency
Payoff: the contractual result
At expiry, a bought Call pays notional × max(exact FX rate − strike, 0); a bought Put pays notional × max(strike − exact FX rate, 0). Writing the option reverses the sign. Premium affects total P&L, not the option NPV; currency conversion may be needed.
A simple example
A bought EUR 100,000 Call has strike 1.10 and expires at 1.12 USD per EUR: intrinsic value is USD 2,000. With a recorded USD 500 premium paid and no other initial cash flow, total P&L is USD 1,500.
Illustrative amounts exclude fees and currency conversion. A payoff is distinct from the instrument's value before maturity.
Lifecycle
- Contract created
- Option remains open
- Exchange rate at expiry
- Final result once data is confirmed
- Create the call or put with its notional, strike, expiry and optional premium.
- The European option stays open until expiry; there is no early-exercise action for this product.
- At expiry, obtain the exact exchange rate or record an authorized contract-specific rate. This supplies the terminal observation; it is not a partial exercise.
- Final valuation realizes the intrinsic result for the whole remaining contract. A permitted correction or cancellation of the manual observation changes the valuation inputs while preserving its history.
Using this instrument in OTCValue
Available volatility and disclosed proxies constrain supported pairs and expiries. Missing data can prevent valuation. Manual expiry rates remain contract-specific and auditable. There is no early-exercise workflow for this European product, and the application does not execute a currency exchange.