a fixed strike price is paid out in another currency. Quanto swaps, in which one counterparty pays a non-local interest rate to the other, but the notional amount is in local currency. The second party may be paying a fixed or floating rate. For example, a swap in which the notional amount is denominated in Canadian dollars, but where the floating rate is set as USD LIBOR, would be considered a quanto swap. Quanto credit default swap, in which default protection is purchased on a notional amount specified in one currency, but the regular protection payment is denominated in a different currency. Pricing Quanto Derivatives Pricing quanto derivatives involves modeling financial variables (stocks, interest rates etc.) in a currency which is different from their actual currency. In order to write the dynamics of the modeled financial variables under foreign currency pricing measure one has to apply Girsanov theorem leading to a drift term which depends on its volatility, the FX rate volatility (FX rate between the pricing currency and the modeled variable currency) and correlation between both. This drift term leads to an adjustment in the pricing that is referred to as "quanto adjustment" and falls into the more general category of what is called in mathematical finance convexity adjustments. References External links Pantz, Julien 2011 Quantos and FX Skew https://ssrn.com/abstract=1895474 Brigo, Damiano; Pede, Nicola; Petrelli, Andrea 2015 Multi Currency Credit Default Swaps: Quanto effects and FX devaluation jumps Turfus, Colin 2018 Analytic Pricing of Quanto CDS https://www.researchgate.net/publication/325070862_Analytic_Pricing_of_Quanto_CDS Chung, Tsz-Kin; Gregory, Jon 2018 CVA Wrong Way Risk: Calibration Using Quanto CDS Basis https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID3406004_code2921783.pdf Derivatives (finance) Swaps (finance)