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In this knowledge module, we will learn about currency options, which are similar to stock options. The underlying asset in currency options is a currency, giving the holder the right to buy or sell it at a set price on a specific date. Unlike forward contracts, entering into an option contract is not an obligation. It provides the holder with the right to decide whether to exercise the contract or not. This concept will be explained further with a specific example as we move forward. It is important to note that currency options give the holder the right to buy the underlying currency at a specific rate, regardless of market prices.
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