I have a question regarding quanto options in the interdealer market. When a trader hedges his quanto risk in the interdealer market, he trades an ATM Synthetic Quanto Spread (the difference of 2 forwards) Let's take a "quanto" structure: SPX quanto Euro. [Call(S)_Dom - Put(S)_Dom] - [Call(S)_For - Put(S)_For] S: is the foreign index (ex: SPX which is denominated in USD) _Dom: as in domestic currency _For: as in foreign currency Now the question is, how are both legs discounted? OIS_Dom for the domestic option part and OIS_For for the foreign?
In all honesty, walk over to nuclearphynace or wilmott forums. Most of ET users don't even know what a quanto is.
Obviously quanto is derogatory term for quants, as in “You lousy quanto stop stealing all my profits!”