Value of currency forward vs currency option

In an example on a past exam.

To calculate the credit risk of a party, you find the value of the contract. For the currency forward, they discounted spot rate and forward rate using the respective risk-free rates to calculate the difference. But for options contract they straight up subtracted the difference between spot rate and the strike price.


The market value of the option is the credit risk of the option. Only the owner of the option bears credit risk. You will not be tested on valuing an option as it is complex and is not a closed form solution for American options