Abstract
This paper explores the properties of perpetual currency options and their uses. Perpetual currency options could be highly useful in controlling the uncertainties of foreign currency flows of unknown timing. Yet they are not traded in any market at the time of the present writing. Nonetheless, they have several interesting uses in both theoretical and trading environments. As American-style options, perpetual options provide boundary conditions as the limiting cases of short-lived traded options. They possess the theoretical advantage that valuation equations, hedge ratios, and related quantities may be written down, in contrast to their shorter-term American currency option counterparts. Due to their relative simplicity, there is also a nomogram which graphically depicts their exercise boundaries. By replication techniques, perpetual currency options may be produced even in the absence of actual markets in the instrument.
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