Questions tagged [fx]
The foreign exchange market (forex, FX, or currency market) is a global, worldwide-decentralized financial market for trading currencies. Commonly traded instruments include spot, forward, swaps, futures, and options. The FX market is the most liquid financial market in the world. There is no unified or centrally cleared market.
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What is the meaning of Domestic Exchange Rate here?
So I have the following formula for the Pricing of a Quanto Option (see image below).
While I understand this formula pretty well, I am not sure what is referred to as "domestic exchange rate&...
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How a trade influence the forex market?
I'm trying to program a basic forex simulator in order to test strategies. But I don't know how is influenced the market when a position is opened or closed.
For example, if I open a 10 000 000 € BUY ...
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FX Risk Reversal - RHS/LHS - Strike adjustments
I was wondering why ppl use the wordings being „rhs/LHS“ right hand side / left hand side when having an risk reversal for example Long EUR Call / USD Put and Short EUR Put / USD Call. Do they refer ...
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FX-swap market convention question for o/n
Can someone enlighten me regarding the market convention for quoting an overnight fx swap where one leg is USD and today is a USD-holiday (but not a holiday in the other currency)? An example is ...
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FX exposure in foreign equity index futures and commodity futures [closed]
For an US investor, buying an European index futures contract doesn't generate EURUSD exposure to the portfolio, since this trade is equivalent to borrowing EUR and buying the underlying.
Can I follow ...
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How to quickly calculate PV01? Or quickly calculate notional back given PV01 and duration?
is there a way to quickly calculate the PV01 of for example for a swap EUR fix floating 10 years?
And is it possible to calculate the Notional, with a given PV01 and the years of the trades or ...
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PIP Value conversion - How can I convert my Pips? general formula [closed]
So I was wondering, how I can convert for example a 20 pips charge is(Spot: 1.0250 with pips 1.0270) on EURUSD into EURCNH Pips with (Spot EURCNH at 7.3005). Is there a general formula and short-cut?
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How a central bank earns Foreign currency [closed]
Today given the strengthening of USD, many Central banks are trying to lift their domestic currencies by selling their USD holding.
My question is how a central bank earns and save USD in their kitty? ...
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How is implied volatility on future treasuries used to expect Forex volatility? [closed]
I was listening to some traders talk amongst themselves.
One emphasized the importance treasury implied Vol as a useful indicator for forex vol/trading.
I don't totally see the connection.
I have a ...
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FX Long/Short Positions datasource [duplicate]
I was wondering if there is any free resources where I can see/ download total FX long/short positions (size or at least number of contracts) in the market currently?
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hedging out of cross-ccy vol risk using direct ccy options [closed]
Lets suppose a G10 FX vol market-maker starts out with a flat book. During the day, the market-maker bought a EURUSD 1 week ATM straddle from one client while sold USDJPY 1 week ATM straddle from ...
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FX Option Vol Quotes (Days or Days+Time to Expiry)
I understand FX Options are often quoted via ATM, RR, BF for 10/25 deltas. There are many resources that outline how to convert those quotes back into absolute strike space (using spot delta or ...
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Model based PnL explain for FX Options
In FX options the vol surface for a given maturity is usually described by three or five points, I.e. Atm, 25 delta risk reversal and butterfly and 10 delta risk reversal and butterfly. Then models ...
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Vanna vs volga and vega
So the bloomberg article that I'm referring to (Bloomberg. Variations on the Vanna-Volga Adjustment. Travis Fisher. Quantitative Research and Development, FX Team. January 26, Version 1) states that ...
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Volga Vanna Pricing Approach
So when using this method to price exotic options , it's stated that we need to calculate the vanna (how vega changes with respect to change in spot prices) of the exotic option and the volga ( how ...
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STIR Topics: XCCY pricing and trilemma between SOFR, FF & FRA
Question on STIR.
Suppose we sell a 3m JPY swap with spot start date, and we are able to back out the 3m implied JPY forward points (hence swap points), using 3m JPY OIS (3m TONA) and 3m USD OIS (3m ...
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Can a Bond have FX Delta Risk?
Given we know the
Notional
Trade Price
Currency in which the Bond Pays Coupons
FX Rate from Bond Currency to USD
Trying to understand if a Bond can have FX Delta Risk and how it should be computed?
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Pricing FX options on pegged currencies
I'm wondering what's the standard (if any) for practitioners to trade volatility on pegged currencies. Is there any specific convention? I'm thinking situations like EURCHF before the unpeg, how were ...
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Understanding FX forward points and market usage
I've been trying to make sense of how the FX forward market works.
Let's say today is June 13, 2022. And we have the next market info as seen in Bloomberg for the FX cross between USDMXN, assuming mid ...
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How to build an FX curve?
Apologies for the rather broad question! Essentially, I wanted to ask how to build an FX forward curve from scratch. I have some basic understanding of interest rates and discounting but I am lacking ...
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question regarding relation between expectations on different measures
I am a beginner to the theory of stochastic calculus and measure change.
I have derived an equation related to expectations on different measures.
I wanted some expert opinion on whether this is true ...
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Complete formula for calculating forex pip value for XAUUSD with account funded in euros
I'm currently developping forex robot using Python API for Metatrader 5. Among different things, this robot places trades given by external signals (with price, SL and TP).
I use euro funded account, ...
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FX Swap PnL and NPV
Suppose I have an existing FX Swap, suppose the spot leg is already settled, so only forward leg is left.
Question: What will be the P&L for this instrument - only forward leg NPV or spot leg is ...
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Dynamics of FX rate
I've see a couple of places where a FX rate, denoted $X$, such as EURUSD (quoted as "the number of USD needed to buy 1 EUR") is modeled with a diffusion process / Geometric Brownian Motion ...
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Single Curve Problem - due to Basis [duplicate]
I recently came across the single curve problem that states that we need differenct curves for discounting cashflows and projecting forward floating rates.
On google I am not able to find a proper ...
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Help needed in replicating FX Implied Vol Surface
I am relatively new to this area and am doing some self studying on SLV model. I am however getting stuck on trying to replicate this implied vol surface (which I will use to calculate the local vol)
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Hedge return of foreign asset
Given that $S(T)$ is the value of an asset in a foreign currency, $X(T)$ is the spot domestic/foreign rate, $P_t$ is the value of a Portfolio in the the domestic currency (invested in $S$) and $z^{f}$ ...
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Uncovered interest rate parity
I know that empirically the uncovered interest rate parity fails. But let's set that aside for a moment.
The uncovered interest rate parity says:
$$(1+r_{USD}) E_{EUR,USD} = (1+r_{EUR}) $$
where $r_{...
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What type of curve is used for pricing fx forwards?
When pricing FX forwards, what type of curves are used? OIS, LIBOR, SOFR, etc?
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Quantlib: day-by-day evaluation of option value
I'm using Quantlib in Python to price an FX option. I'm comparing the result to Bloomberg, to make sure the code is working correct.
I want to calculate the P&L of a certain option trading ...
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Quantlib: Greeks of FX option in Python
I'm using Quantlib in Python to price an FX option.
I'm comparing the result to Bloomberg, to make sure the code is working correct.
I also want to calculate all the Greeks, and eventually use those ...
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FX weights and P&L
How to correctly express basket of currencies in and index, such that P&L would align?
Assume our index is 20% EURUSD and 80% GBPUSD and rates are 1.10 and 1.31 for T1 and 1.05 and 1.35 for T2. On ...
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Implied forward rate with forward points
I've been studying the application and derivation of a domestic implicit rate in a FX contract when your input are the forward points and the foreing rate. Let's establish some with some ideas first.
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Option P&L over time
I would like to compute the evolution of the P&L of an FX plain vanilla option. Unfortunately, I am not sure about the correctness of my reasoning.
Let's imagine that I sell a 1W call option on a ...
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Hedging exchange rate risk from ADR with FX Forwards
Is there a more efficient way of hedging exchange rate risk from ADRs instead of constantly trading FX Forwards? How does the industry usually hedge that risk?
Moreover, is it reasonable to suppose ...
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How do you identify nondeliverable swap
what is unique about NDS transactions, how can I identify them using certain parameters or attributes specific to NDS?
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Carry trade by trading FX Futures
FX carry trade is pretty clear to me when one's trading currencies physically. The return for this trade will depend on the interest rate you're paying for the USD borrowed, the foreign interest rate ...
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Why would exchange rates follow a geometric brownian motion?
I'm reading Shreve's Stochastic Calculus for Finance.
On page 382, he begins talking about exchange rates:
Finally, there is an exchange rate $Q(t)$, which gives units of domestic currency per unit ...
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In FX markets, option can be expressed as either call or put. Explain
For example, if option contract has condition: $AUDUSD = 0.8$ at the maturity date, and current exchange rate is $1 AUD = 0.75 USD$.
For this option, it could be considered a call option on $USD$, and ...
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Euro/Foreign Exchange Volumes
I'm trying to put together a financial analysis notebook as part of a data science program. One thing I am trying to find is the frequency of currencies that are traded with the Euro. I have looked at ...
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Triangular Arbitrage In FX Volatility
If I know the price of $GBPUSD$ and $EURUSD$, I can retrive the $EURGBP$ price simple by $EURGBP = \frac{GBPUSD}{EURUSD}$.
Is there something equivalent to FX Volatility? Knowing the $\sigma_{GBPUSD}$,...
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Delta of FX Options, Different Currency in Trading Book - Trading Interview Question
Having done stochastic analysis in university, together with tons of other math courses, do never prepare you for an actual interview in trading. Stumbled on what I believe might be an easy question, ...
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Fx futures pairs
I want to setup a pairs trade with the Japanese yen as the quote currency and Mexican peso as the basis currency. (long MXP vs JPY)
2 /M6J contracts, notional is 1,250,000 JPY = 10966.5*2 = 21933 USD ...
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Data source for FX options
I have daily quotes for the new york and london fixings of fx options on EURUSD. On Bloomberg I can choose between two sources: BGN and CMPN. Apparently these are based on slightly different methods ...
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Simple three-pair triangulation question
I have a question I came across whilst self-studying and I need to use cross-currency triangulation. I am not too sure how to apply the cross-rate formula, and was hoping someone could show me how to ...
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FX option quotation in interbank market
I am looking at the different ways in which FX options (say EUR/USD option) are quoted in interbank markets.
Is it quoted using the option chain? I also saw a piece where it is said that it is quoted ...
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Inflation effect on FX rates
With UK's inflation surging to 3.2% as per the published figures today reported by the FT, it is interesting to ponder the effect of rising inflation on FX rates.
The article linked above points out ...
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sizing fx futures trades by targeting volatility
If I lever up a JPY/USD futures with a 6% volatility/contract 2x to meet my 12% volatility target, how many contracts should I buy per $100,000 I have in liquidity? How do I size my position based on ...
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FX option premium conversion from one currency to another
Suppose we have an FX option with the underlying FX rate $X^{FOR/DOM}$ and suppose we used a Black like formula to get the price, which is given in domestic currency. How can one simply convert the ...
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Interpreting an Order Book (example Kraken.com)
An (forex) Order Book (OB) for a trading (forex) pair (e.g. XBT-USD) has ASK and BID rows. Each row has PRICE and VOLUME (at least). Each row represents an offer for selling or buying a maximum of ...
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