At exercise the value of the option is calculated as the difference between the market price and the strike of each single underlying (strip) of a basket option. If the result is positive, the option is in the money and the buyer of the option receives the pay out from the seller of the option.

A basket option is cheaper than the sum of all plain vanilla options because it is usually less volatile.

If a basket option is exercised all single currency puts or calls have to be exercised.

Basket options with several underlyings have the disadvantage that all currency strips have to be exercised even if one or more of them are in or out of the money.

Several plain vanilla options can be exercised per currency in respect of their moneyness on the expiration date.

The difference between a basket and several plain vanilla options occurs if correlations between the participating currencies change after inception.

Use the Fix Average Rates report to fix the rates for a basket option. The rates can be reset using Reset Average Rate Fixing .